BSP PREPARES TO ISSUE OWN DEBT PAPER BY Q3
The central bank on Wednesday took another step closer toward issuing its own bonds— which would allow it to better regulate the amount of liquidity in the local financial system—by linking its electronic trading platform with that of the Bureau of the Treasury.
The agreement, once in operation, will facilitate the seamless auctioning of Bangko Sentral ng Pilipinas (Bsp)-issued bonds and the registry and recording of these securities to enable primary market issuance and secondary market trading.
Speaking during the signing ceremonies of the deal, BSP Governor Benjamin Diokno said the monetary authority “will need greater flexibility through
use of its various instruments to manage the sizable liquidity released in the financial system in the months ahead.”
Previously foreign to BSP’S operations, the issuing of bonds by the monetary authority was allowed by Congress in the latest amendments to the central bank’s charter. By selling bonds to the market, the BSP can siphon off cash from the financial system to slow inflation, or buy them back and release liquidity to encourage economic growth.
“The BSP is looking forward to its first issuance of securities this quarter,” Diokno said. “It took many years to finally amend the BSP charter and with it, restore the BSP’S authority to issue its own freely negotiable securities.” The initial issuance of BSP securities is set within the third quarter of 2020, once all the requirements to support the issuance are in place.
Wednesday’s ceremony marked the signing of the memorandum of agreement between the BSP and the Treasury for the linkage of the central bank’s Monetary Operations System and the Treasury’s National Registry of Scripless Securities.
The deal was signed by Diokno and National Treasurer Rosalia de Leon and was witnessed by Finance Secretary Carlos Dominguez III.
The connectivity of the two systems is an integral part of the process for the issuance of BSP bonds. Diokno said the agreement marked an important step toward the actual issuance of the BSP’S own securities for open market operations.