BTr wants BSP to lower SDA yield

The Bureau of Treasury is urging the Bangko Sentral ng Pilipinas (BSP) to reduce the interest yield it pays banks on special deposit accounts (SDAs). High interest yield causes the central bank to “bleed" by an estimated P40 billion a week for a one-week placement, Deputy Treasurer Eduardo Mendiola said. In an interview with reporters Wednesday, Mendiola said that lowering the yield rate on SDAs would encourage banks to pull out funds parked in the BSP vault. This would favor the national government, he added. “Immediately, we will have a lower borrowing cost." Banks and investors continue to park their funds — now amounting to nearly P1 trillion — in the BSP vault while they search for high-yielding investment instruments. Introduced in November 1998, SDAs are fixed-term deposits by banks and trust entities of banks and non-bank financial institutions with the BSP. Investors continue to shift to high-yielding SDAs from reverse repurchase agreements or RRPs which — a central bank tool to mop up excess money from the financial system, according to the BSP. In an RRP transaction, banks buy securities from the central bank with both parties agreeing that the security papers will be sold back to seller at a later date. First Metro Investments Corp. executive vice president Juanchito Dispo said there is a need to reduce the 4 percent yield of SDAs. The money may be moved to productive investments in power, utilities, and infrastructure – rather than glued to the central bank vault — and help quicken capital markets development, he said. “If you want money to go to productive use, you should cut SDA rates," Dispo said. The central bank's Monetary Board has kept its key interest rates unchanged in eleven consecutive policy meetings since July 2009, with overnight borrowing at 4 percent and lending at 6 percent. — JE/VS, GMANews.TV