BAP sets up asset trading desk

Instead of setting up a liquidity pool, the Bankers Association of the Philippines (BAP) has put up an asset trading desk that would enable banks suffering from huge withdrawals to immediately sell their holdings of commercial papers and other debt instruments, BAP Executive Director Leonilo Coronel told The STAR yesterday.

"Contrary to what was reported, we are not pooling funds. We have tried it before and it is hard to do because of credit considerations. What we have now is an asset trading desk where banks and non-bank financial institutions can sell their triple-A grade commercial papers and receivables," he explained.

The BAP, which groups together the country's 53 commercial banks, would act as a broker and look for potential buyers for the assets for disposal. The desk was set-up on April 27, the day after Urban Bank declared a bank holiday.

Coronel said there was no limit as to how funds that the BAP could mobilize through this scheme as long as the debt papers are of high quality. He said there are a lot of buyers for these securities, especially among the country's biggest banks that are currently experiencing high liquidity.

Most of the BAP member-banks, he said were not comfortable with a liquidity pool that would extend loans to banks in crisis.

"This facility is for everybody, even non-bank financial institutions can avail of it," he said. "Right now, we have so much buyers but there are no sellers," he added.

It would be recalled that Urban Bank lost around P3 billion in deposits on April 25 and 26 after it was reported that it has been downgraded by the Bangko Sentral ng Pilipinas into a thrift bank from a commercial bank after it failed to meet the higher capital requirement. The bank has P2.2 billion in capital as against the required P2.8 billion.

Days after, two commercial banks also suffered heavy withdrawals namely International Exchange Bank and Philippine Bank of Communications. These banks, however, preferred to avail to financing from the BSP instead of tapping the BAP desk.

The BSP usually extends emergency loans to banks facing a run on its deposits as long as these are backed by government securities or other triple A assets.

Coronel said after the BAP has found the buyer for the assets, it is up to the seller to discuss the conditions of the sale.