BSP, DOF eye MOA on debt issuances
The Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) is now discussing the manner, maturity and timing of bond issuances after the BSP’s authority to sell debt papers have been restored under its amended charter.
National Treasurer Rosalia V. De Leon said she is currently setting out the details of a memorandum of agreement (MOA) with BSP Deputy Governor Diwa C. Guinigundo on how the central bank will issue its debt instruments.
“We’re discussing what they will issue and we have to see which part of the curb they (BSP) will be issuing (bonds),” said De Leon. They also have to iron out how the BSP “will implement that provision (to issue debt instruments) in their charter. As for the MOA, it’s something (on the table) for some time.”During Friday’s BSP press chat, where officials discussed the salient features of the newly amended New Central Bank Act or Republic No. 11211, BSP Deputy Governor Ma. Cyd Tuano-Amador said the BSP can now use its arsenal of policy instruments to finetune monetary aggregates in the economy.
“We have the current instruments (open market operations such as the term deposit facility) but this one, the restoration of the authority to issue central bank debt papers … enables (the BSP) to use this instrument particularly during times where you have a structural surplus liquidity … As to when it will be used, obviously it will be dictated by the times.”
Tuano-Amador added that the “operational details of the issuance of BSP debt papers witll be carefully coordinated with NG (National Government) particiularly in terms of tenor.”
“(The) BSP is for fine-tuning monetary policy and that speaks for the kind of tenor we will be using to make sure money supply that is available or sloshing around the sytem, is adequate to lubricate the function of the economy. We would like to be able use that instrument in both normal as well as non-normal situations,” she further explained.
There was an agreement between the central bank and the NG before, through the DOF, that only the government will tap the bonds market. The BSP, on the other hand, will concentrate on the loans market.
BSP Senior Assistant Governor for Capital Market Operations Sub-Sector, Ma. Ramona GDT Santiago said this old agreement was exclusive for the international bonds market.
“I think that arrangement that NG will issue bonds and BSP will go to the loans market – it was more for international borrowing when we were building up our reserves (gross international reserves),” said Santiago. “That was for the international market (and) in those days there was an informal or a gentleman’s agreement. This is (now) for the domestic market,” she added.
Guinigundo, in a separate interview, said the BSP bonds which will be negotiable and marketable, may be called the “Monetary Stabilization Bonds” when it is issued in the future.
He said its impact on the capital market will be significant and that it will be a “critical element” in its development.
“(The BSP) can move more quickly” when using its open market operation instruments such as the TDF, said Guinigundo, and that the BSP bonds will be focused on monetary stabilization. They can collateralize BSP borrowings through the overnight reverse repurchase and the regular open market facility, he added.
Republic Act No. 11211, or “An Act Amending Republic Act No. 7653, Otherwise Known as the ‘New Central Bank Act’, and for Other Purposes”, was signed into law by President Duterte last February 15.
Guinigundo said that in the past, the BSP was severely constrained by the old law, or RA 7653, which prohibited it from issuing its own debt securities.