Term deposits...

they need to place their money very quickly. That would explain the tighter competition and lower rates,” he said.

The BSP has been mopping up excess liquidity in the financial system as banks continued to lend more, buy foreign exchange for imports, debt servicing and foreign investments.

This prompted the central bank’s auction committee to temporarily scrap the 28-day term deposits in the weekly TDF auction.

“We shall restore the 28 days TDF in due time as liquidity normalizes after the holidays and the banks have more regular view of their investment horizon,” Guinigundo added.

He earlier said the BSP is consulting with banks on the possible introduction of a third tenor that could probably be a cross between the seven- and 28-day term deposits.

The TDF is a key liquidity absorption facility used by central banks for liquidity management. It is tasked to withdraw a large part of the structural liquidity from the financial system to bring market rates closer to the BSP policy rate.

Liquidity in the financial system rose 14.8 percent to P10.26 trillion in end-October last year from P8.94 trillion in end-October the previous year while credit growth eased to19.9 percent to P6.81 trillion from P5.68 trillion as banks continued to lend more to the productive sectors.

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