Long-term securities for thrift banks OKd

THE 80-strong thrift banking industry may now invest in long-term securities, the financial instrument that was inaccessible to them in the past. Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. told reporters the policymaking monetary board finally approved the proposal after  having sat on it for more than two years. The approval came with a bonus. The long-dated securities investments also qualify as compliance to the mandatory allocation of loans to small- and medium-scale enterprises, or SMEs. Under the law, thrift banks are required to set aside at least 2  percent of their loan portfolio for lending to medium-scale enterprises and another 6 percent to small businesses. “Thrift banks may now invest in long-dated securities. The monetary board has evaluated the proposal and approve of it,” Tetangco said late Friday. The Chamber of Thrift Banks (CTB) has been advocating for this approval for years, hounding Tetangco ever since the governor assumed the BSP helm in July 2005. The regulators have limited the industry’s securities investment horizon to just a year to keep their exposure as liquid as possible in case a member gets into trouble. The limitation has hampered thrift banks that have plenty of cash in their vaults. It has also narrowed possibilities for making money in an industry that also exhibits less inclination for lending. CTB president Alfredo Lao previously lamented they could not even leverage their foreign-currency deposits at a time when SME loan demand has significantly fallen off. Tetangco said the approval should also help ease the growth of money supply, accelerating above 20 percent for more than two months now. While not threatening at the moment, M3 growth, as it is also known, should significantly slow down and revert to growth in the low teens range. Domestic liquidity has been expanding 23 percent to 24 percent in recent months, higher than that posted by the monetary system in China. The BSP has already adopted anti-liquidity measures in an effort to stem inflation in the coming months. --J. Vallecera

 

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