Diokno insists on BSP fund inclusion in Maharlika

Finance Secretary Benjamin Diokno yesterday insisted that the country’s central bank is in a better position to help the government establish the Maharlika Investment Fund (MIF) despite calls for its outright exclusion amid recent financial shocks.

In a forum hosted by the Foreign Correspondents Association of the Philippines yesterday, Diokno maintained that the financial position of the Bangko Sentral ng Pilipinas (BSP) is better than before, making it suitable to finance the country’s first sovereign wealth fund.

Earlier, Senate committee on ways and means chairman Sherwin Gatchalian sought the outright exclusion of the BSP as a fund source for the proposed MIF amid growing concerns of financial shocks globally.

Gatchalian cited the current liquidity crunch facing the banking sector in the US triggered by the collapse of Silicon Valley Bank (SVB) and Signature Bank.

Concerns over the health of the global financial system were further stoked by Credit Suisse’s largest single-day selloff in the US and European markets.

“These developments are reminiscent of the 2008 collapse of Lehman Brothers that prompted a market meltdown and a global recession, leading central banks all over the world to execute dramatic easing of monetary policy rates,” Gatchalian said.

But Diokno is not budging as he claimed that the BSP is “much different” now than before.

The finance chief also highlighted the BSP’s contribution to the national government of some P500 billion in loans at the height of the pandemic because “it has the money.”

“The financial position now of the central bank is much better than before. It will not curtail whatsoever because the contribution is already declared dividend, which is already after doing everything [computation],” Diokno said.

Based on the current form of the MIF bill, the BSP will inject some P100 billion, without touching the gross international reserves, as seed capital.

Amid the anxiety in the financial market, Diokno argued that bank runs or when customers withdraw all their money simultaneously amid fear of insolvency, cannot be avoided.

But he noted that the current banking turmoil is not as serious as the global financial crisis in 2008 as central banks globally have already strengthened their financial systems.

“There may be some disruption, but it will not be as serious as the global financial crisis. In fact, for the Philippines, I don’t think we are going to be affected at all directly because we don’t have any transaction involved in SVB,” Diokno said.

Gatchalian, on the other hand, is pushing for the BSP’s exclusion from the MIF. He maintains that inclusion of BSP funds would expose the country’s financial system to uncertainties.