Limited access to SDAs to affect P1B in funds

More than P1 trillion in retail investments in special deposit accounts (SDAs) will be affected by the new regulation limiting access to the SDA facility, according to estimates from the Bangko Sentral ng Pilipinas.

Of the affected funds, some are expected to either shift to other investment instruments or to regular deposit products while others are seen to stay in SDAs but no longer as retail investments but as unit investment trust funds (UITFs) managed by banks.

Under BSP Memorandum 21-2013 issued last week, only funds in trust accounts and UITFs may be placed by banks in the SDA facility. All other funds, mostly retail investments by individual clients of banks, will no longer be allowed access to the facility.

“The latest measure involving the SDA facility is geared toward realizing its original purpose, which is to serve as a monetary tool [for siphoning excess liquidity in the economy] and not as a retail investment instrument,” BSP Governor Amando Tetangco Jr. yesterday told reporters at the sidelines of a forum held at the BSP headquarters in Manila.

In a separate interview Friday, Monetary Board member Felipe Medalla said more than half of the nearly P2 trillion deposited in the SDA facility were in the form of investment management accounts (IMAs), or retail funds placed by banks on behalf of their individual clients.

“Significantly, more than half of the money in SDAs is composed of IMAs. With the fine-tuning of the SDA facility, we expect funds to start shifting from SDAs until the deadline set by the BSP,” Medalla said.

According to the implementation schedule of Memorandum 21-2013, banks should have withdrawn from the SDA facility 30 percent of the covered funds by the end of July and the balance by the end of November.

Penalties, including revocation of access to the SDA facility, will be imposed on noncompliant banks starting January 2014.

Tetangco stressed, however, that any reduction in the amount of funds placed in SDAs was not expected to be drastic because a significant portion of the affected funds would simply shift from IMAs to UITFs to be able to stay as SDAs.

“We don’t anticipate major shifts in system liquidity as a result of the new policy on SDA access through trust departments,” he said.

But on the funds to be pulled out from SDAs, Tetangco said some of these could turn into regular bank deposits. He said the shift to bank deposits would be welcome since this would mean banks would have more resources for lending to businesses.

Tetangco said the BSP wanted banks to lend more to businesses to help boost job creation in the country.