Quantcast

Bangko Sentral seeks additional capital

Funds needed to ensure monetary stability

By |

Burdened by huge losses from its dollar purchases and interest payments, the Bangko Sentral ng Pilipinas has asked for additional capital from the government, saying financial support would help ensure monetary stability given the surge in foreign capital and domestic liquidity.

The BSP said fresh financial support from the government would come in handy as the substantial foreign exchange inflow and rising domestic liquidity posed risks of faster inflation and a steep appreciation of the peso if not managed properly.

“Yes, the BSP has indicated to the government the need for additional capitalization,” BSP Deputy Governor Diwa Guinigundo told the Inquirer.

The request for financial support followed a statement from the Department of Finance that the government intended to settle by the end of the year the remaining P10 billion worth of capital that it owed the BSP and that it might extend more if the latter asked for it.

“The economy has grown and the financial system has expanded many times over, and yet the BSP’s capital base has remained the same. We need more resources to further enhance the effectiveness of monetary operations and monetary stability,” Guinigundo said.

Under the charter of the BSP, which was created in 1993 to replace the old central bank, the government was mandated to infuse P50 billion in fresh capital. However, due to budget constraints, the government gave the BSP only P10 billion in its first years of operations. With an improved fiscal situation and prodding by monetary officials, the government gave the BSP another P10 billion in December 2011 and another P20 billion in December 2012. This leaves P10 billion more in capital that the government owes the BSP.

Finance Secretary Cesar Purisima was quoted as saying last month that the finance and the budget departments have agreed to disburse the balance by the end of this year. He also said that given the need to ensure that the BSP remained effective in the delivery of its mandate, the government was open to requests for additional support.

Due to its heavy dollar purchases and interest payments, the BSP has been posting losses since 2012. Its latest income statement showed that in the first 11 months of 2012, it incurred a net loss of P86 billion, surging from P33.69 billion in 2011.

The dollar purchases were said to be necessary to help temper the peso’s appreciation. The peso gained about 7 percent against the dollar in 2012 to become one of the fastest-appreciating currencies.


Follow Us







Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

  • akita88

    To ask or even demand for additional capitalization by the BSP is tantamount to screwing the Filipino people twice or thrice in a row. Firstly, I remember vividly when the BSP lend billions (was it 1 or 3 billion dollars?) to the IMF and when some public and private sectors asked if it is not possible to channel it locally instead to pump prime the economy, the BSP rejected it outright and claimed that the money is outside of the government’s jurisdiction – or something to that effect. Now that it’s losing money and needed capitalization, it turns around from the same government it had rejected for the same money it badly needed – this is the second ‘screw’ if I may add. A classic case of the BSP having its cake and eating it too.

    And finally the third ‘screw’. When the Central Bank became the Bangko Sentral Ng Pilipinas, its personnel were exempted from the Salary Standardization Law which made their salaries triple and even quadruple (mind you this is a conservative estimate) in size in addition to their allowances, perks and privileges. With these sky high salaries and allowances, what have they to offer the Pilipino people who pay their salaries? A begging bowl? It looks like the top economists of the BSP simply screw up big time when they continued sustaining the ‘SDA” vehicle for so long a time at the expense of the country’s financial health. Either BSP top honchos take a drastic salary cuts or just resign and let the true professionals take over to save the Philippines from another economic and financial “BULILLAZO”.

    • MiguelLorenzo

      agree akita.. and cut down on their foreign travels too. many personnel in bsp are being sent abroad for training or seminars

  • UrHONOR

    I have no knowledge or an informed source of the mechanics of the BSP operations…..but, speciously, the losses incurred by the Central Bank supporting the dollar to abate inflationary effects of the fast-rising money supply are achieved by countering the forces of demand and supply. While the local currency is managed from a runaway appreciation (should be well under 40 if not controlled) the TRUE and MEANINGFUL consequences of the economic forces are not actually reflected. BSP statisticians might have a good rationale for the baffling measure but surely it’s nice if someone else could offer a concise explanation in non-economic technical terms the wisdom of the BSP strategy.

    • http://twitter.com/erncastillo ern

      leave that to the technocrats… wag na makisawsaw ang di nakakaintindi dyan. Any concerned citizen who needs the data can go to the BSP. Pati militanteng panggulo makakisahog na naman dyan para manira.

      • me, me, me

        if you wont ask, then you will always be the tail thats being wagged by the dog. yes, we will not have any control over their decisions, but at least we understand the “wisdom” behind. think of it as a thinking tail that is being wagged.
        and plus, whats so negative about aking for explanation for the purpose of learning? whats all the negativity about?

      • UrHONOR

        LEAVE what to whomever you want to? Leave understanding where your MONEY is being thrown around? Kaya nagkakaganyan ang sambayananay dahil yong dapat na sawsawan, iniiwasan…. at yon namang hindi dapat sawsawan, binababaran. Anong mahihita mo sa DATA-DATA kung hindi ka marunong umunawa ng data at kung hindi mo alam anong DATA ang bubusisiin mo? So, ang mga nakakintindi ang kumikita at yong mga tamad umintindi ay pa-asa-asa na lang sa TIME DEPOSIT at CD na, sa kabuuan, pagkatapos ng isang taoon, lugi pa sa kita sa intere dahil sa inflation. Tapos, magtititili at magrereklamo na ang mayayaman ay lalong yumayaman… at ang mahirap, pahirap ng pahirap. Paano, maglalaro ng basketbol, e, ayaw intindihin ang RULES of the GAME….gusto e shoot-na-lang-ng-shoot kahit bano’ sa shooting.

      • eight_log

        Typical thinking of our so-called technocrats …. hindi gusto malaman ng taong bayan kung ano ginagawa nila, kung papano ginagawa at kung para ano ang ghinagawa nila … kung naiintindihan nga naman ng taong bayan siguradong maraming makikitang kabulastugan sa mga ginagawa nila. Kung sa bagay … kadalasan naman kasi hindi nila alam ginagawa nila kaya hindi nila mapaliwanag … traffic nga lang hindi maayos ayos … sa EDSA man o sa NAIA …. hahahaha!!!! Yuing mga naluluging mga banko … kita naman na meron corruption … meron kasing mga tao dyan sa CB na nababayaran. Sariling investments sa stock market ang inaatupag ng mga tao dyan … hinmdi yung investment ng sambayanan.

        Interest ng money changers ang pinoprotectahanh ng CB kaya sila nalulugi ng napakalaki vis $$$$ trading. Nagintorduce ng SDA … tapos hidi tiningnan ng mabuti kung ano ang maging effect nito sa kabuuhang economiya ng bansa … kaya ngayon weekly ang rate cutting … banks are dangerously exposed to speedy increase in loans involving real estate and cars … ano kaya ang mangyari kung biglang bumagsak ang stock market????

    • http://www.facebook.com/billy.reyes.984 Billy Reyes

      man if don’t have knowledge about this go to sleep don’t make your life difficult. he he…

      • pitingkapuya

        He has every right to understand the operations of BSP as a government institution if he is a citizen of this country.

      • UrHONOR

        TAMA nga naman dahil IGNORANCE is BLISS. Have a blissful sleep, kabayan!

    • Roland_F

      The BSP created this very stupid time deposit ‘SDA’ vehicle to skim excess liquidity from the market.
      Well : the road to hell is paved with good intentions’ — or good intention is the opposite of good….
      As central banks around the world flooded the market with liquidity (US-FED, BoE (GB), ECB and now BoJ join the club) plus near Zero interest rates in most countries — those excess liquidity was attracted as hot money inflow into the Philippines.
      BSP guaranteed with a whopping 3.5% interest (now lowered) as safe heaven in a shaky global market with near zero interest.
      BSP shoot themselves twice in the knee — (1) they had to pay high interest for now 2 trillion Peso , pay for money they really don’t need plus (2) they generated with those attractive offers a massive inflow of foreign currency (most US$) which lost in value compared to Peso – a double loss.

      • UrHONOR

        Well, that much I understand pretty well. In fact some years back I converted all my USD to PhP where I got a whopping 3.8% in SDA with 5MM and up against .5%. No contest. Then, as expected, the SDA started losing points….50 basis points at a time, then 100 is forthcoming. I then started buying corp bonds of FG and SMC that have been giving me attractive returns.

        My frustration is the AYUDA being accorded by the BSP to the USD, purportedly to benefit the exporters and OFW. But going against the MIGHTY FORCES of economics has been disastrous as exemplified by a great number of national economies. BSP must really have a good reason other than what I cited for doing so, otherwise our BSP Governor would not have earned the title of one of the 6 World’s Best Central Bankers over the past year.

        Thanks for your thoughts.



Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement
Advertisement
Marketplace