MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) will examine the financial records of banks to address “possible” loopholes in line with its new order prohibiting foreign funds from investing in its special deposit accounts SDAs.
“We will check (compliance) through targeted on-site review,” BSP Deputy Governor Nestor Espenilla told The STAR in a text message.
The BSP has prohibited foreign funds from investing in its SDA in an effort to curb currency speculation.
There have been concerns that foreign investors have become attracted to the SDA’s four-percent interest rate, which is higher than the near-zero rates in crisis-stricken Europe and the United States.
Two bankers, however, said that it is “possible” foreign funds can enter through the banks’ unit investment trust funds (UITF), pooled money from depositors under the bank’s or trust entity’s professional management. These funds are then invested on bonds, stocks, SDA or to all the three financial instruments.
“We invest in the SDA and yes we have a lot of UITF invested in SDA,” BDO Capital president Eduardo Francisco said in a phone interview.
Asked if foreign funds can enter SDA through UITF, Francisco said: “That is possible. I do not know how the BSP will handle that.”
Philippine Business Bank president Rolando Avante concurred, stressing however, that foreign funds “can easily be traced despite being in a pool.”
Offshore funds usually enter the country in “big volumes,” he explained, allowing regulators to track these “as they are placed in the UITF.” It will be then easy to locate if they are invested in SDA, he added.
Avante however clarified that banks only use SDA to park funds “when they wait for new investments like bonds or other forms.”
“UITFs are not for short-term investment,” he added.
Latest available data from the Trust Officers Association of the Philippines showed that there are a total of 16 banks in the Philippines offering UITF products.
Among them are the country’s three largest banks in terms of assets: BDO Unibank, Inc., Metropolitan Bank and Trust Co. and Bank of the Philippine Islands.
Also included are Allied Bank, Philippine Bank of Communications, Rizal Commercial Banking Corp. (RCBC) and its thrift arm RCBC Savings Bank, Security Bank Corp., Philippine National Bank, Bank of Commerce, Asia Trust Bank, Inc., China Banking Corp., and state-run Land Bank of the Philippines.