Trust entities traded a total P1.8 trillion of Bangko Sentral ng Pilipinas (BSP) securities in 2022, based on BSP data.
The BSP allowed trust entities of banks to buy BSP securities or bills in the secondary market last year to counter the effect of higher excess liquidity.
In 2022, a total P1.9 trillion of 28-day BSP bills were traded in the secondary market, of which P1.8 trillion were by trust entities.
The BSP said that in the same period, the outstanding holdings of trust entities amounted to P135.5 billion.
The BSP securities are monetary instruments that help the central bank to absorb liquidity in the financial system. It has recently added a 56-day tenor as catch basin after the BSP cut banks’ reserve requirements ratio on June 30.
In 2022, the total BSP bills subscription amounted to P8.2 trillion or 1.3 times the offered volume of P6.3 trillion. In comparison in 2021, the total subscription was P6.8 trillion or 1.4 times the P4.9 trillion offer.
Last October 2022, the BSP again expanded the access of trust entities to the BSP securities by allowing unit investment trust funds (UITFs) of eligible trust departments of banks, regardless of whether the UITFs have funds from non-residents or not, to invest in BSP securities via the secondary market.
Trust entities may purchase securities in the secondary market for any UITF in which the share of net assets of non-residents does not exceed 10 percent of the net assets of the fund. This effectively improved the tradability and viability of BSP securities as a highly liquid instrument, thus allowing for better price discovery and monetary policy transmission.
Besides the BSP bills, the BSP’s open market operations also have transactions in the overnight reverse repurchase or RRP facility, the term deposit facility, the overnight deposit facility (ODF) and the overnight lending facility (OLF).
At the end of 2022, OLF availments totaled P49.2 billion, a significant increase from just P1.9 billion in 2021. According to the BSP, most banks utilized the OLF for business continuity plan testing, while others accessed the facility to fund government security purchases and loan releases.
Both the TDF and the BSP bills have weekly auctions. The BSP will also start to auction a variable rate RRP facility within the quarter or September at the latest, part of its transition to becoming a more effective toolkit in monetary policy transmission.
The BSP was only able to offer securities in September 2020 after the BSP Charter was amended in 2019, thereby restoring its ability to issue its own bills and bonds. Before 2019, the BSP was only allowed to issue its own debt securities in cases when there are extraordinary movements in price levels.