Bangko Sentral gets P10B more in capital
The government has infused P10 billion in additional capital into the Bangko Sentral ng Pilipinas in view of a potentially tougher task of keeping inflation modest this year.
With the latest capital infusion, the government has completely settled its liabilities to the BSP.
“The BSP already received the amount this week,” BSP Governor Amando Tetangco Jr. told reporters on Friday.
Under the charter of the BSP, which was created in 1993 to replace the old central bank, it is supposed to get a P50-billion capitalization from the government.
Due to budgetary constraints, however, the government initially gave the BSP only P10 billion. The additional P20 billion was infused in December 2011 and another P20 billion in December 2012.
Monetary officials last year strongly pushed for the settlement of the remaining P10 billion in capitalization, saying the money would help ensure that the central bank will be able to efficiently perform its mandate of managing liquidity in the economy.
The call was made amid growing liquidity, given the robust expansion of the economy that needed to be well managed to keep inflation modest despite price pressures.
The Philippine economy became one of the fastest growing Asian economies in 2013, with its gross domestic product expanding by an average of 7.4 percent in the first three quarters.
The expansion of the economy was partly aided by the growth in loans extended by banks that helped boost demand for goods and services by consumers and enterprises.
For the past few years, the BSP has been incurring losses arising from efforts to prevent growing liquidity from causing inflationary problems.
The central bank has been accommodating higher deposits from banks to temper the growth of liquidity circulating in the economy. This pushed the BSP’s interest expenses up.
The BSP incurred a net loss of P59 billion in 2010, nearly P34 billion in 2011 and about P95 billion in 2012. In the first 10 months of 2013, its losses have reached about P22 billion.
In the meantime, the additional capital infusion was just one of the items in the BSP’s wish list.
The BSP is also pushing other measures that will help enhance its efficiency in fulfilling its mandate of ensuring price stability.
The monetary authority wants a law allowing it to issue and trade its own securities. Being able to buy and sell its own securities would aid in efforts to manage liquidity in the economy, officials said.
The BSP is likewise seeking exemption from state taxes to reduce its expenses.
It also wants a scheme that will require the government to share not only in the BSP’s income but also in losses.
The central bank hopes to get automatic financial support from the government every time it registers net losses.
Currently, as stated in the BSP charter, it is mandated to remit 75 percent of its income to the government as dividends. However, its charter does not require the government to provide funding support in case of losses.
