THE Bangko Sentral ng Pilipinas (BSP) is planning to conduct its maiden securities issuance within the third quarter.
“The BSP is looking forward to its first issuance of the BSP Securities this quarter. It took many years to finally amend the BSP Charter and with it, restore the BSP’s authority to issue its own freely negotiable securities,” BSP Governor Benjamin E. Diokno said during the signing ceremony on Wednesday.
“Thus, the prospect of an additional market-friendly instrument in the BSP’s policy toolkit is something to look forward to as we continuously enhance our monetary policy implementation and liquidity management under the Interest Rate Corridor framework.”
The BSP signed a memorandum of agreement to link its monetary operating system (MOS) and the National Registry of Scripless Securities (NRoSS) of the Bureau of the Treasury (BTr).
“The connectivity of the MOS and the NRoSS is the main infrastructure that would allow the issuance to be possible and would make the features of the BSP,” Mr. Diokno said.
BSP’s MOS is an electronic platform that allows counterparties to take part in the central bank’s liquidity tools. Meanwhile, the NRoSS of the BTr serves as an electronic registry system for government securities.
Reuters quoted Mr. Diokno as saying the central bank is looking to offer a small volume of securities with short-term maturities.
BSP Deputy Governor Francisco G. Dakila, Jr. said the amount of the initial issuance will be based on the BSP’s forecast of the total amount of excess liquidity that needs to be absorbed.
The BSP will coordinate with the BTr to ensure the issuance will not overlap with the schedule and tenor of government bonds.
“The determination of frequency of auction [of BSP issuances] will depend on market conditions,” Mr. Diokno said.
Mr. Diokno clarified that BSP securities are meant to manage liquidity “to support monetary policy transmission” which differs from the government securities issued by the BTr meant to fund government spending.
He said the BSP securities will form part of risk-free assets alongside government securities.
“The funds will remain locked away at the BSP until the securities….In particular, the issuance of BSP securities is expected to facilitate the construction of benchmark yield curve at the short end, which the market can refer to when pricing loans to finance debt instruments,” he said.
Once the central bank securities are issued, secondary market trading will be done through the Philippine Dealing and Exchange Corp.
The BSP’s authority to issue its own securities is provided under Republic Act 11211 or The New Central Bank Act signed into law in February 2019.
“By being able to issue debt securities, the BSP is empowered with a more targeted approach to achieving desired monetary policy outcomes. Should there be excess structural liquidity in the financial system, the BSP will be able to respond more effectively,” Finance Secretary Carlos G. Dominguez III said. — Luz Wendy T. Noble