Camacho raps banks for ‘profiteering’

Finance Secretary Jose Isidro Camacho lashed out at banks yesterday, accusing market players of "profiteering" by taking advantage of persistent coup rumors to force domestic interest rates to go up.

Reacting harshly to the Treasury bills auction on Monday, Camacho said the Bureau of Treasury (BTr) was left with no recourse but to reject all bids outright since banks were making unreasonably high bids based purely on rumors.

The auction committee headed by the BTr threw all bids away for the 91-day, 182-day and 364-day Treasury bills, warning banks that government could afford to continue rejecting their bids if the market insists on making unreasonable bids.

The BTr rejected all bids for P4 billion worth of the benchmark 91-day notes, as well as the bids for P2.5-billion 182-day notes and P4 billion worth of 364-day notes.

The rate for the benchmark T-bills would have gone up by 68 basis points to 5.849 percent while the rate for the 182-notes would have gone up from 6.355 percent to 6.854 percent.

The biggest jump would have been in the 354-day notes – from 6.742 percent to 8.043 percent.

Camacho said banks were undermining the improvements in the country’s fundamentals, especially the narrowing of the budget deficit due mainly to record performances by the Bureau of Internal Revenue and the Bureau of Customs.

"What upsets me is that the market is taking advantage of these rumors when they know very well that our economic fundamentals are good, our fiscal numbers are improving and there really is no reason for interest rates to go up," Camacho said. "It smacks of profiteering."

"We are constantly dealing with complaints and criticisms that the government is not doing its job and yet look who is taking advantage of the situation," Camacho said.

According to deputy treasurer Eduardo Mendiola, the bids were „unreasonably high." Officials said there was no reason for interest rates to go up.

"The rumors may be driving the market but we do not factor that in to our decision-making process," Mendiola said. "We can’t let interest rates go up just because there are rumors in the market."

Mendiola reprimanded banks for getting carried away by the rumors that another coup d’etat would break out this week, led by still unidentified factions in the military.

"They should not be using rumors as basis for making bids in the auction," Mendiola said. "We can afford to continue rejecting because there is still sufficient liquidity in the market."

The BTr also still has a considerable cash position after the successful closure of its retail treasury bond offer which generated P74.31 billion for the national coffers, way above the original projection.

The Bangko Sentral ng Pilipinas (BSP) said interest rates should remain stable, as it voted last week to keep its policy rates unchanged at 6.75 percent for the overnight borrowing rate and nine percent for the overnight lending rate, the lowest level since May 1992.