MB terminates access of trust entities to BSP deposit facilities » Manila Bulletin Business

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by Lee Chipongian

Trust entities’ outstanding placements to the central bank’s overnight deposit facility (ODF) and term deposit facility (TDF) should be zero by June 30 as trust entities’ access will be discontinued by July 1.

 Bangko Sentral ng Pilipinas (BSP) issued Circular No. 961 on June 2 for further amendments to the rules and as reminder to trust entities of the October 27, 2016 Monetary Board resolution cutting off access to deposit facilities.

 “The Monetary Board … approved the discontinuance of access of trust entities to the BSP deposit facilities. Trust entities shall no longer have outstanding placement in the ODF and TDF by June 30,” according to the circular memo signed by BSP Governor Amando M. Tetangco Jr.

The BSP discontinued trust entities’ access to its deposit facilities to discourage its use as an investment instrument.

The BSP said deposit facilities “serve as a monetary policy instrument for managing domestic liquidity in the financial system. It is not intended to become an investment outlet of banks and trust entities.”

The exit in ODF and TDF was done gradually. The ODF and TDF trust accounts and unit investment trust funds or UITFs was first reduced by 50 percent and removed with a December 31, 2016 deadline, and by another 30 percent on March 31, 2017. The last deadline for the placements termination will be June 30.

 Placements in the TDF and ODF are contractual in nature and governed by the intent of the contracting parties.

 The trust departments as trustees or trust entities had access to the facilities but limited to fund management activities of trust accounts. As for pooled funds, the BSP only allow UITFs access to the TDF and ODF.

 The central bank shifted to the interest rate corridor last June 3, 2016 – which created the ODF and TDF – to help “enhance the link between the stance of BSP monetary policy and financial markets and, thereby, impact the real economy.”

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