Liquidity absorbed by the Bangko Sentral ng Pilipinas (BSP) in the country’s financial system climbed to P2 trillion at the end of 2020, according to a central bank official.

During a virtual briefing on Thursday, Zeno Ronald Abenoja, senior director at the Bangko Sentral’s Department of Economic Research, said “the demand for BSP deposit facilities remained strong in the last part of 2020” as “the total outstanding amount absorbed by the BSP liquidity facilities stood at P2 trillion.”

Bulk of the liquidity-absorbing monetary operations of the BSP had been through the overnight deposit facility, making up about 67 percent of the liquidity absorbed, he added.

“The term deposit facility (TDF), the reverse repurchase agreement (RRP) and the BSP securities facilities continued to be important elements of the BSP’s open-market operations,” Abenoja said.

The central bank’s Fourth Quarter 2020 Inflation Report showed placements in the TDF, RRP and securities facilities made up 16.3 percent, 15.5 percent and 11.2 percent, respectively.

The BSP official also highlighted the positive reception of the regulator’s issuance of 28-day BSP bills since their first auction in September.

“Thus far the results that we are seeing from the weekly options reflect sustained strong demand amid the ample liquidity in the system,” he said, pointing out that total subscriptions reached P1.42 trillion, or about 1.7 times the Bangko Sentral’s P840-billion aggregated offer amount for the fourth quarter of 2020.

The central bank’s authority to issue negotiable certificates of indebtedness, even in normal times, was restored by Republic Act (RA) 11211. Signed into law in February 2019, RA 11211 amended RA 7653, or the “New Central Bank Act of 1993.”

Before the amendment, its debt offerings were only allowed in cases of extraordinary price movements.

BSP securities are monetary instruments issued under the interest rate corridor framework for its monetary policy implementation and liquidity-management operations.

The Bangko Sentral has said the securities would also add to the pool of risk-free assets in the financial system, alongside those issued by the government that can be traded for liquidity purposes.

Through the regular auction of BSP securities, the issuance of such securities can contribute to improved price discovery for debt instruments and support monetary policy transmission in the process, it added.





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