At its meeting on 9 May 2013, the Monetary Board approved the revised guidelines on the access of banks and trust departments/entities (acting as trustees) to the BSP’s Special Deposit Account (SDA) facility. Beginning on 1 January 2014, placements of trust departments/entities in the SDA facility shall consist only of funds from trust accounts allowed under existing regulations. The Monetary Board, following consultations with the trust industry, decided that all other SDA placements of trust departments/entities such as investment management accounts (IMA) shall be reduced by at least 30 percent by end-July 2013 (relative to the outstanding balance as of 31 March 2013) and the remaining balance shall be phased out by end-November 2013.
The Monetary Board stressed that the SDA facility is primarily a monetary policy instrument that is made available to banks since 1998 to help the BSP manage excess domestic liquidity in the financial system. Trust entities and trust departments of banks were subsequently given access to the facility in 2007, allowing the BSP to further absorb liquidity from the financial system. The Board’s decision to rationalize the operations for liquidity absorption through the SDA facility is in line with the BSP’s continuing efforts to fine-tune its monetary policy instruments and therefore gain greater flexibility in conducting monetary operations, while ensuring adequate liquidity for economic activity. The Monetary Board noted that the benign inflation environment and robust domestic growth prospects provided flexibility for the BSP to fine-tune its monetary policy toolkit.
The revised guidelines are outlined in the Memorandum to All Banks and Trust Departments/Entities No. M-2013-021 dated 17 May 2013. The memorandum shall take effect immediately upon publication in any newspaper of general circulation.
Going forward, the BSP will continue its efforts to review its monetary policy instruments to help ensure their effectiveness in promoting the BSP's price and financial stability objectives.