By Lee C. Chipongian
The central bank offered more term deposit facility (TDF) this week at ₱200 billion, the biggest auction from the Bangko Sentral ng Pilipinas (BSP) since the TDF was introduced in mid-2016 as part of the interest rate corridor system.
Banks have more liquidity after the BSP cut reserve requirement ratio (RRR) by 400 basis points (bps) in 2019, releasing more than ₱400 billion into the financial system.
BSP Governor Benjamin E. Diokno said that, based on data, a large portion of banks’ extra funds after the RRR reduction were placed back at the central bank’s open market operations, namely the TDF. This was as expected, he added.
“We released something like ₱400 billion (and) not all of it went into (bank) lending yet,” said Diokno. “Most of it (liquidity) came back to us.”
“Monetary policy works with a lag so when we released such amount into the system we don’t expect that there will be an immediate response. The fact that (liquidity) is going back to us (is) in response to the reality that they are not ready yet,” said Diokno. The RRR reduction has a lag of six months to one year, similar to an interest rates’ cut. (LCC)