Banks' special deposit accounts surge 43% to P834B in 1H

The banks' special deposit accounts or SDAs with the Bangko Sentral ng Pilipinas — the money that banks could have lent to households and corporations but have kept instead with the central bank — reached P834.4 billion at end-June this year. This was almost 42 percent higher than the previous year when when SDAs amounted to P584.9 billion. The SDA facility consists of fixed-term deposits by banks and by trust entities of banks and non-bank financial institutions (NBFIs) with the BSP. It was introduced in November 1998 to enable the BSP to expand its liquidity management toolkit. In April 2007, the BSP expanded access to the SDA facility by allowing trust entities to deposit in the SDA facility in order to better manage liquidity in the face of strong foreign exchange inflows. Economists and analysts have asked the BSP to slash the interest rate on SDAs to encourage banks to lend more of their funds instead of parking their money with the central bank. Metrobank's First Metro Investment Corp. and the University of Asia and the Pacific are persistent about the proposed reduction of the 4-percent interest rate on SDAs. They argued that letting more funds out into the system would allow the Philippines to sustain the stronger-than-expected gross domestic product growth rate of 7.3 percent registered in the first quarter of the year. Monetary authorities, however, are lukewarm to the proposed rate cut saying there is already ample supply of money in the economy and further release of liquidity into the system could stoke inflation. —JE/OMG, GMANews.TV