The Bangko Sentral ng Pilipinas (BSP) has unrealized gains of P689 billion in 2022, which was P72 billion in excess of what it posted in 2021 of P617.3 billion.

Under the BSP law, unrealized gains are called revaluation of foreign currency accounts. It used to be called revaluation of international reserves.

The 2022 unrealized gains was bigger than in the last three years because the BSP engaged in massive US dollar selling last year of about $15 billion in defense of the depreciating peso which hit a record lowest of P59 vis-à-vis the greenback on Sept. 29. The previous all-time lowest was in 2004 of P56.45.

In 2020 and 2021 when the exchange rate was averaging at P49.62 and P49.25 based on BSP data, the central bank’s unrealized gains amounted to P425.94 billion and P478.42 billion, respectively, in those two years. Last year, the peso averaged at P54.47.

As previously explained by BSP Governor Felipe M. Medalla, who is probably up for a second term as BSP chief, the revaluation of the country’s international reserves is literally the unrealized gains from the fact that the peso has depreciated. “So, when the peso depreciated, we have unrealized gains,” said Medalla, adding that the BSP borrow in pesos to buy foreign assets.

With a substantial unrealized gains, Medalla said the central bank has no need for more capital infusion at this time.

Under the amended BSP Charter, it is supposed to have P200 billion capitalization which it can raise by not remitting dividends to the National Government (NG). At the moment the BSP has a P60-billion capital. Due to the pandemic, the BSP continued to remit to the NG in 2020 and 2021 to help in the anti-pandemic response.

Medalla has said that since BSP’s unrealized gains are more than P200 billion, it could afford to delay its recapitalization.

The BSP’s capital and net worth has become news lately due to proposals that it will have to contribute 100 percent of its dividends to the Maharlika Investment Fund (MIF). The implication if they do this, is that BSP will not receive its full capital for another 14 years or so.

If MIF in its current Senate version is approved as a law, it will siphon off BSP’s 100 percent dividend payments for the first two years of the wealth fund. In the succeeding years, the BSP will remit 50 percent of its declared dividends to the wealth fund while the remaining 50 percent will go to the government until the increase in the BSP capitalization has been fully paid. Thereafter, the BSP will remit 100 percent of its declared dividends to the fund.

Under the revised New Central Bank Act, amended in 2019, the BSP has a higher capitalization of P200 billion versus its old 1993 charter which only allowed for P50 billion. The new BSP law however states that the additional P150 billion will come from its own dividends.

As of end-2022, the BSP’s net income amounted to P83.82 billion, up by P49.1 billion or 141.4 percent compared to P34.72 billion in 2021.

BSP had a huge net gain of P83.36 billion from its foreign exchange (FX) transactions due to US dollar selling last year. These are realized gains on FX rates fluctuations. In 2021, BSP’s FX gains only amounted to P3.26 billion.

BSP’s total assets declined to P7.247 trillion in 2022, down by 4.3 percent from same time in 2021 of P7.576 trillion. Bulk of these assets are BSP’s international reserves which have been depleted. Last year, the country’s reserves dropped to $96.15 billion versus $108.79 billion in 2021.

The central bank’s liabilities also decreased by 4.1 percent to P7.136 trillion from P7.439 trillion. Liabilities are deposits such as the term deposit facility and the overnight deposit facility, and currency issues.

Meanwhile, the BSP’s net worth amounted to P110.87 billion compared to P136.70 billion in 2021. The BSP’s surplus or reserves was also lower at P50.87 billion last year from P86.22 billion.