Central bank reduced losses by 75% in 2013

FILE PHOTO

MANILA, Philippines—The central bank’s losses narrowed significantly last year following operational adjustments in the special deposit account (SDA) window that helped reduce interest costs for the monetary authority.

Based on the 12-month income statement of the Bangko Sentral ng Pilipinas (BSP), the regulator came out in the red for the fourth consecutive year. The BSP posted losses in five of the last seven years, according to the statement released Wednesday.

The central bank ended 2013 with a net loss of P24.26 billion—75 percent less than the P95.38 billion it posted the year before.

This improvement in the regulator’s finances was partly brought on by the reduction in its interest expenses.

In 2013, the BSP spent P58.68 billion on interest, which was more than a third lower than the P90.76 billion reported in 2012.

The lower interest payments came about after the BSP changed the rules in governing the SDA window.

In the first half of 2013, the central bank banned all individual investments from being parked in the SDA facility.

The total ban took effect in November, but most banks started withdrawing affected funds ahead of the deadline.

The biggest improvement in the BSP’s books, however, came as a result of the foreign exchange movements in 2013.

From a loss of P50.38 billion in 2012, due to foreign exchange movements, the BSP was able to post a P5.60-billion gain in 2013 as a result of the weaker peso.

In 2013, the peso depreciated against the US dollar by 7.35 percent due to the volatility in financial markets caused by monetary policy adjustments in the United States. This was in contrast to the 6.8-percent appreciation against the greenback reported in 2012.

A weaker currency inflates the peso’s value—on paper—of the BSP’s dollar-denominated assets. The BSP’s assets include $83.7 billion in foreign exchange reserves, which are in the form of foreign debt securities, major currencies and gold.

This was partly offset by a 14-percent drop in revenue to P56.53 percent from P65.73 percent.