Bangko Sentral wants gov’t share in profit cut to 50%

The Bangko Sentral ng Pilipinas wants to reduce the share of the national government in the net profit of the monetary agency to 50 percent from the current 75 percent.

The BSP also wants the national government to share the burden whenever the central bank incurs a net loss.

BSP Deputy Governor Diwa Guinigundo said an equitable profit-and-loss sharing arrangement was prudent to help ensure the country would continue to have a well-functioning central bank. The proposed scheme would help the BSP maintain a sufficient buffer, which could help it absorb losses during difficult times, he added.

In 2010 and 2011, the BSP incurred losses of P59 billion and P33.7 billion, respectively, due to its foreign exchange operations. The BSP said it had to spend significantly more on dollar buying to help curb what could have been a sharper appreciation of the peso. Too much increase in the value of the peso hurts the export sector as it makes Philippine-made goods more expensive in dollar terms and, in effect, less competitive.

Under the proposal, Guinigundo said the national government might be asked to provide budget support to the BSP should the state-owned agency incur a loss. The budget provision could be automatically appropriated in the national budget, he said.

The official added that the budget provision could be extended only in times when losses become significant. “[Provision of budget support] does not have to be done annually. It can be triggered by the BSP’s net worth reaching a certain precarious level,” Guinigundo said.

The proposed change in the income-and-loss sharing scheme with the government is included in the bill seeking to amend the BSP charter. The BSP is hoping that Congress will finally prioritize the bill, which has been languishing in the legislature for years.

“We want a change in the income-sharing arrangement in recognition of the unique role that the BSP plays,” Guinigundo told reporters yesterday at the sidelines of a Senate hearing on the proposed 2013 national budget.

Meantime, the BSP is against proposals in the Senate to disallow the deduction of foreign-exchange losses from its income for purposes of computing dividends for the government.

Some legislators wanted the BSP to refrain from deducting foreign exchange losses from its income so that the profit share of the national government would be bigger. The proposal was anchored on the objective of helping the government generate more resources to fund vital development projects, such as infrastructure and social services.

The BSP, however, said such a proposal would further drag the central bank’s ability to generate retained earnings, which were needed as buffer during stressful periods such as when heavy dollar buying is needed to help stabilize the peso.