By Melissa Luz T. Lopez, Senior Reporter
THE central bank will consider floating debt notes at a time of a significant surplus in the financial market, noting that future issuances will have to be coordinated with the national government to avoid crowding out Treasury papers.
The newly-enacted Republic Act (RA) 11211 updates the New Central Bank Act and brings back the authority of the Bangko Sentral ng Pilipinas (BSP) to issue “negotiable evidences of indebtedness.”
BSP Deputy Governor Maria Almasara Cyd N. Tuaño-Amador said authorities are looking for an appropriate window to issue debt notes.
“The central bank wants to have an expanded toolkit, a policy instrument, an arsenal of policy instruments that can be used to fine-tune monetary aggregates in the economy… [I]t’s a structural surplus liquidity absorption tool,” Ms. Tuaño-Amador said in a press chat on Friday. “So as to when it will be used, it will be dictated by the times.”
“[W]hen we have significant structural liquidity surplus, then we can start thinking about using the central bank debt papers,” she added.
Prior to this, the BSP official noted that such authority is reserved for episodes of “extraordinary” financial conditions, which is said to ring alarm and disruption if availed. She added that the central bank would like to tap the option to float notes “in both normal and non-normal situations.”
BSP Senior Assistant Governor Ma. Ramona Gertrudes D.T. Santiago noted that they will have to set up a formal agreement with the Department of Finance (DoF) for the central bank’s foray into local debt issuances, as they transition into offering market-based and negotiable notes.
“The operational details of the issuance of the central bank debt papers will be carefully coordinated with the national government, particularly in terms of tenor,” Ms. Tuaño-Amador added, noting that this will ensure that there will be “no competition” between the two state-run offices.
The Bureau of the Treasury, an attached agency of the DoF, is mainly in the business of offering debt papers ranging from a 91-day to a 20-year tenor. Meanwhile, the BSP’s weekly term deposit offerings range from the seven to 21-day maturities.
Another key feature of the new law is the P200-billion capital for the BSP, which will be sourced from the central bank’s dividend payments to the government. BSP General Counsel Elmore O. Capule said the process entails that the dividends remitted to the state — which is equivalent to half their net income each year — will be returned to them as additional capital subscriptions.
Ms. Tuaño-Amador said they will secure these supposed dividend payments until they collect the additional P150 billion capital provided by the law.
Updates to the BSP charter will officially take effect on March 5.
Mr. Capule added that implementing rules for the wide array of changes will be carried out via separate BSP circulars, as well as memoranda of agreement with other agencies like the DoF and the Bureau of Internal Revenue for tax exemptions.