MANILA, Philippines - Deposits parked on special deposit accounts (SDA) are on a sustained downtrend, hitting a five-month low as of the first half of June as investors shied away from lower returns offered by the facility.
SDA placements – banks’ and trust departments’ funds with the central bank – fell to P1.799 trillion as of June 14, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
The latest tally marked a steady drop from P1.852 trillion two weeks before, which was a four-month low. It dipped further to P1.817 trillion as of June 7 before penetrating the P1.7-trillion level in the current record week.
Total SDA deposits are now at their lowest level since January. They have already decreased by 9.28 percent from their peak of P1.983 trillion last April 15, and are also just around seven percent above the P1.674 trillion posted as of end last year.
“It is clear from the main numbers that funds used to be parked on the SDA are now migrating to bank deposits and some other short-term conservative instruments,†said Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, in a phone interview.
The BSP has slashed the interest it offers on SDA placements – with tenors of one week, two weeks and one month – by a total of 150 basis points this year, bringing them down to two percent from the original 3.5 percent.
The move, it has said, was meant to push out funds into the financial system in a bid to deepen the capital markets and provide adequate money for projects that will boost economic activity and growth.
“In the first place, this is what the BSP has in mind: to free up liquidity, which a growing economy like ours really need since there is more demand for funds,†Neri explained.
Money supply expanded by 16.3 percent as of May, the biggest jump in nearly six years, the BSP reported last week. The central bank said last Friday the economy remains safe from overheating.
Neri agreed. “That is something very manageable given the situation,†he said, pointing to the 7.8-percent growth recorded by the local economy in the first quarter.
“There is clearly more room for liquidity to be absorbed by the economy,†he added.
For his part, Raul Victor Tan, senior vice president for Treasury at the Rizal Commercial Banking Corp., said SDA deposits could further decline in the coming months, especially as banks unwind some prohibited accounts beginning this July.
According to Memorandum 2013-021, trust departments will have to remove 30 percent of singular investment management accounts (IMA) parked on the SDA by July 31. A complete phase-out will have to be done by November.
Earlier estimates provided by banks put the amount of IMAs in the facility at around a trillion pesos. BSP has refused to provide its own estimate.
“Some (IMAs) may go into UITFs (unit investment trust funds) but not substantial because the characteristics are different,†Tan said in a text message.