BSP's 'other' reserves total $47.8 B in 2022

Banks’ foreign currency deposit units (FCDUs) posted an all-time high of $47.85 billion in US dollar stock as of end-December 2022, up by 3.8 percent from 2021’s $46.09 billion, based on Bangko Sentral ng Pilipinas (BSP) data. FCDUs’ reserves or deposit liabilities on a quarterly basis was 4.5 percent higher from end-September 2022’s $45.77 billion. Residents owned 97.2 percent of these deposit liabilities or $46.5 billion. “Essentially constituting an additional buffer to the country’s gross international reserves (GIR),” said the BSP. Including banks’ FCDUs, the Philippines’ total GIR stood at $144 billion as of end-2022. The BSP’s official reserves or GIR was reported at $96.15 billion in end-December. As of end-February this year, the GIR amounts to $98.22 billion. The FCDUs’ latest deposit liabilities data is only up to end-2022. While the BSP’s first line of defense is the GIR, it has a another source of US dollar flows from FCDUs. As of end-2022, FCDU loans rose slightly by 0.4 percent to $15.8 billion from $15.7 billion in 2021 as disbursements exceeded principal repayments. Gross disbursements in the fourth quarter of 2022 totalled $14.2 billion, down 3.3 percent from the previous quarter. Loan repayments also fell by 3.9 percent to $14.1 billion, resulting in an overall net disbursement. The BSP noted that FCDU loans managed to post a slight increase due to non-residents’ transactions despite the net tightening of overall credit standards of lender banks as a result of uncertainty in the economic outlook. It added that residents’ transactions also declined due to the “uncertain global environment, rising borrowing cost and FX (foreign exchange) volatility.” About 62.1 percent or $9.8 billion of FCDU loans were borrowed by residents with businesses in power generation companies, merchandise and service exporters, and management/holding and stock brokerage firms. FCDUs are local units of banks that are permitted to engage in foreign currency transactions including foreign currency deposits. There are 76 banks with FCDU authority, of which 43 are universal and commercial banks. The rest are thrift banks and rural and cooperative banks. Banks with both Expanded FCDU or EFCDU and FCDU authority are allowed to engage in foreign currency-foreign currency swap, and in foreign exchange trading. They can also – with prior BSP approval -- engage in financial futures and options trading.