Wider investment areas sought

BANK TRUST OFFICERS SEEK B.S.P.
OK TO PUT MONEY IN OVERNIGHTS

 

BANK treasury officials want to be able to invest in more areas than current rules permit and have sought permission from the Bangko Sentral ng Pilipinas to put some of their holdings in the overnight market.

The intent, according to the president of the Treasury Officers Association of the Philippines (TOAP), Ma. Lourdes de Vera, was to give the unit investment trust fund (UITF) managers greater access to liquid assets than is currently possible.

Strict BSP guidelines limit the areas to which UITFs may invest in “only tradable securities,” essentially government securities, deposits and tradable loans.

“We feel the existing permissible areas too limiting and we have communicated this informally to the BSP,” de Vera said in a telephone interview.

The overnight is that portion of the vast financial market where banks and financial institutions find princely sums of money they need to meet reserve or operational benchmarks and avoid the painful monetary penalties that come with noncompliance.

Thus, a reserve-deficient bank may borrow a couple of billions from this facility with the intent of returning the loan in 24 hours. The BSP, for instance, makes available at this market a portion of its vast resources for 9.75 percent.

But this market is off limits to UITFs as part of a phalanx of safeguards the BSP has put in place to keep the integrity of the UITF business intact.

De Vera said the TOAP request was forwarded to deputy BSP Governor Nestor Espenilla Jr. in May when the market was most volatile.

Up to now the regulators have not come back to say the overnight market was a permissible area of investment for UITFs, de Vera said.

De Vera, also senior vice president at the trust banking group of Banco de Oro Universal Bank, appeared cool to an internally suggested proposal allowing UITFs to set aside a portion of their holdings as exempt from the marking-to-market rule.

Marking to market allows fund managers to calculate daily the present or market value of holdings relative to the number of investors, such that each investor can always know whether his investments have inflated or been eroded.

The globally practiced marking to market replaced the accrual method used in computing the value of one’s investments in the now unwinding common trust funds.---J. Vallecera

http://www.businessmirror.com.ph/sfp01.php