MANILA, Philippines – Money parked in the central bank’s Special Deposit Accounts (SDAs) hit P1.77 trillion as of Aug. 2, rising week-on-week despite Bangko Sentral ng Pilipinas (BSP) efforts to push away funds from the facility.
The amount was slightly higher than the P1.75 trillion recorded as of July 26, BSP data showed.
However, this was lower than the P1.79 trillion recorded in end-June and the P1.85 trillion seen in end-May.
The central bank introduced SDAs in late 1998 to mop up excess liquidity in the financial system. But the falling interest rates prompted investors to park their funds in the facility instead of putting money in other financial instruments.
As a result, the BSP has cut SDA rates by 150 basis points this year to two percent.
It has also ordered the removal of 30 percent of individual deposits in the SDA by July 31. A total phase-out of these individual deposits, estimated to account for P1 trillion of the facility, was also ordered by November.
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Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, noted concerns hounding the markets may be discouraging investors to pull out their funds from the SDA facility.
“There’s the aspect of the somewhat cautious mode of the market given equities are actually seeing a sharp reversal and investors would probably want to park their funds in more conservative instruments,” Neri said.
“When the mood of the market shifts to more optimism, we would probably see more funds exit the SDA facility and be reallocated to riskier assets down the road,” he added.
Neri also recounted there are limited options of instruments where individuals can invest in, making the SDA facility more attractive to investors.