Suspension, revocation of access to facility
By Michelle V. Remo
Philippine Daily Inquirer
12:56 am | Thursday, January 31st, 2013
Saying it was serious about keeping foreign funds away from the special deposit accounts, the Bangko Sentral ng Pilipinas said banks caught placing money of their foreign clients in SDAs would either have their access to the deposit facility suspended or revoked.
The BSP said it would conduct on-site investigations of banks to determine based on their records whether they were indeed complying with a recent memorandum prohibiting banks from investing foreign funds in SDAs. The BSP issued Memorandum 2012-034 in the middle of last year to remind banks that foreign funds could not be placed in SDAs. In the memorandum, banks were also required to submit a letter to the BSP assuring that funds they invested were not owned by foreign clients.
“Verification will be done through on-site examination since under BSP Memorandum No. 2012-034, banks are expected to have in place their own monitoring and assurance mechanisms consistent with the required Letter of Undertaking to be submitted to the BSP,” BSP Deputy Governor Diwa Guinigundo told the Inquirer.
Guinigundo said the BSP has a way of determining compliance by banks through audits to be done by central bank representatives at their offices.
“The memo to banks also states that ‘whenever the BSP has reason to believe that a bank or trust department/entity is unable or unwilling to comply with the terms and conditions for the access to the SDA facility, the BSP may limit, suspend or deny access by the bank, its trust department or a trust entity to the SDA’,” Guinigundo added.
The issuance of the memorandum last year followed the huge volume of foreign capital inflows that pushed the value of the peso to a four-year high.
The BSP said it believed that some of the foreign funds that were coming in were being invested in SDAs. The BSP likewise thought that keeping foreign funds away from SDAs would somehow temper the rise of the peso. The peso closed at 41.05 against the dollar at the last trading day of 2012 compared with 43.86 at the start of the year.
The rise of the peso elicited complaints from the export sector, which said the strengthening of the local currency had made Philippine-made goods more expensive and, therefore, less competitive.
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Tags: Bangko Sentral ng Pilipinas , Banking , special deposit accounts
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