SDA funds down to 3-year low

Posted at 01/07/2014 8:14 AM

MANILA, Philippines - The amount of money in the Special Deposit Accounts (SDA) under the Bangko Sentral ng Pilipinas (BSP) fell to a three-year low as of Dec. 20 after the central bank prohibited banks and financial institutions from parking investment management account funds from the facility.

Investment management accounts are singular accounts entrusted by individuals to banks’ trust arms.

According to central bank data, SDA money amounted to P1.353 trillion as of Dec. 20, the lowest level since hitting P1.238 trillion in December 2010. Funds in SDA peaked to as much as P2.2 trillion in April last year.

The SDA was introduced by the BSP in 1998 as a tool to mop up excess liquidity in the financial system.

However, the low-interest rate that persisted in the previous years made investors park their funds in the facility instead of putting them in other financial instruments.

The increasing level of funds in the SDA prompted the BSP to reduce the interest rates and adjust the guidelines in investing on the facility.

Last year the central bank cut the SDA rates by 150 basis points to a record low of two percent. At the same time, the BSP ordered the removal of all investment management accounts in the SDA by Nov. 30, 2013 and were given until December 2013 to clear investment management accounts out of the SDA facility.

Funds in the SDA were down to P1.772 trillion as of Aug. 2 following a partial implementation or a 30-percent removal of investment management accounts in the SDA.

The level of money further plunged to P1.412 trillion as of Dec. 6, after the full phase out of investment management accout in the facility.

The declining level of funds parked in the SDA has been helping the central bank narrow its losses in 2013 versus 2012.

Latest BSP data showed the central bank recorded a net loss of P21.55 billion in the 10 months to October 2013, far narrower than the P78.43-billion seen in the same period in 2012.