Bank’s liquidity drops- report

The banking sector’s average daily market liquidity in the banking system decreased to P8.4 billion in March 2021 from P10.9 billion in December 2020.

According to the financial stability report, market liquidity was adversely affected by foreign exchange outflows and settlement of Government Treasury Bills. “Nevertheless, banks continued to be compliant with the minimum liquid asset ratio requirement of 10 percent and supported borrowing demands, with a financial intermediation ratio of 82.2 percent in March 2021,” said the report.

Commercial banks’ funding structure, however, continues to be concentrated in a few depositors, mainly businesses, reflecting an imbalance in the market and the potential increase in funding costs due to the volatile nature of wholesale deposits.

“This notwithstanding, the funding risks are mitigated by inherently long- term structure of bank deposits, mainly fixed deposits, thus giving banks an opportunity to respond accordingly in case of short- term funding shocks. Moreover, current deposits, which are considered stable/ core, account for a sizable proportion ( 26 percent) of total deposits, “said the report.