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BSP mops up P1.54 T excess liquidity

Business | Banking & Finance

BSP mops up P1.54 T excess liquidity

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has absorbed P1.544 trillion of excess domestic liquidity from the financial system as of end-April this year, via its open market operations (OMO) to manage inflationary pressures.

The BSP said its weekly term instruments such as the BSP securities facility accounted for bulk of mopping up operations.

The combined BSP bills and term deposit facility (TDF) absorbed 69.2 percent of excess liquidity or P1.068 trillion, of which the BSP bills offered every Friday accounted for 50.1 percent or P534.224 billion. The TDF auctioned every Wednesday, meanwhile, accounted for 19.1 percent or P203.988 billion.

The BSP’s overnight reverse repurchase (ON RRP) facility and overnight deposit facility (ODF) accounted for 21.4 percent or P330.416 billion and 9.4 percent or P144.760 billion.

The BSP mops up excess liquidity to control inflation and for active liquidity management.

Basically, it removes money from banks to park these funds in the BSP’s interest-earning monetary operations and to “influence the underlying demand and supply conditions for central bank money.”

The BSP restored its authority to sell its own bonds or securities after its charter was amended in 2019. The central bank auctions BSP bills to reduce money supply. It first introduced the securities facility in September 2020.

The TDF is also one of BSP’s main liquidity management tool. It was first launched in 2016 as part of the interest rate corridor system.

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