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MANILA - The Bangko Sentral ng Pilipinas on Wednesday stressed that foreign entities cannot invest in the central bank's special deposit window to take advantage of interest rate differences.
“The BSP wanted to make it clear the SDA was off limits to foreign funds. The guidelines were not specific enough,” BSP Deputy Governor Armando L. Suratos said.
The central bank on July 13 issued a memorandum expressly forbidding foreign funds from the SDA. The memorandum comes on the heels of a Monetary Board decision to cut the interest rates on SDA placements.
“Banks shall not invest in the SDA facility funds obtained, directly or indirectly, from non-residents,” Memorandum No. M-2012-034 read.
The BSP furthermore required banks to issue an undertaking that certifies the origin of funds placed in the SDA.
The BSP has been restricting access to the SDA in a bid to discourage currency carry trades, which involves borrowing in a currency where interest rates are low and investing them in higher interest-bearing currencies.
The BSP has blamed these carry trades for the sharp appreciation of the peso.
The SDA has drawn more than P1.6 trillion in liquidity, thus helping the BSP keep inflationary pressures at bay no matter the steady inflow of foreign capital.
Inflation in the first six months averaged 2.8 percent, below the three to five percent target range of the BSP.
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