BSP Governor Amando M. Tetangco Jr. said the additional capital should go a long way toward crafting monetary policies and programs, ensuring continued growth of the economy at this phase of the global economic hardships.
“This will be used to strengthen the financial position of the central bank and will enable us to conduct operations more effectively, including the rediscounting facility,” Tetangco said.
He meant the conduct of more massive open market operations down the line to ensure against price pressures brought on by weather-induced supply restrictions and by the influx of foreign capital.
Already the BSP has its hands full, ensuring the surge of foreign capital does not translate to high inflation and paying for it in the form of an emaciated bottom line.
Tetangco has reported net losses of P29.16 billion in the first four months which was 24 percent higher than last year’s losses of only P23.5 billion.
This resulted from revenues of only P23.73 billion, which was brought on by sharply lower than previous miscellaneous income and a steady flow of interest income, versus escalating expenses more than 37 percent higher to P33.81 billion.
Interest expense during the period, incurred in the course of neutralizing fast-rising liquidity driven by surging foreign-capital flows, was almost 46 percent higher to P28.45 billion from last year’s P19.52 billion.
According to latest data, the special deposit window of the BSP already captured P1.7 trillion worth of bank funds for which the BSP incurs interest costs equal to the borrowing rate of 4.5 percent plus a small spread.
It should also be unlikely for the BSP to increase its P20-billion budget for rediscounting purposes, considering the very liquid state of the banks at present, most evident in record low- interest rates for housing loans.
Latest data also show rediscounting availment by banks totalling P11.41 billion as of Oct. 21 this year from prior week’s P10.85 billion.
Tetangco said they stand ready to upsize the rediscounting budget which at one time stood at as high as P60 billion to ensure those lenders willing to take the risk had the financial firepower to back their lending programs.
Banks sell their receivables at the BSP’s rediscounting window and quickly turn around and lend the money again so that what they lose from the rediscounted assets, they more than make up for in interest from new loans.
