BSP prioritizes ₱200-billion capital build-up

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said he prefers to see the central bank’s capitalization of 1200 billion set up first before any other fund-raising efforts, including issuing its own bonds.

“First, we have to increase our capitalization. We’re authorized to increase our capitalization from 150 billion to 1200 billion. After that, we can talk about stabilization bonds,” said Diokno.

He clarified though that if there is a necessity for it, they could sell bonds when warranted. “We can do it simultaneously but our priority right now is to increase our capitalization,” said the BSP chief.

The central bank’s amended law or Republic Act 11211 (“An Act Amending Republic Act No. 7653, Otherwise Known as the ‘New Central Bank Act’, and for Other Purposes”) has allowed the BSP to increase its capitalization by 1150 billion. This will be funded solely from the declared dividends of the BSP.

The new BSP charter also restored its ability to issue its own bonds to manage or control the volume of liquidity floating in the financial system, at any time. It could be part of the central bank’s open market operation but its terms and tenors will have to be coordinated with the Bureau of Treasury.

In the meantime, Section 2 of the amended charter specified that declared dividends will be deposited in a special account in the BSP’s general fund and will be “earmarked for the payment of the BSP’s increase in capitalization (and) such payment will be released and disbursed immediately and will continue until the increase in capitalization has been fully paid.”

On top of the exemption from declaring dividends to the National Government (NG), the BSP is also exempted from all national, provincial, municipal and city taxes, fees, charges and assessments on income derived from governmental functions.