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October 07, 2022

Central bank reconfigures gov’t securities window as part of exit measures

The Bangko Sentral ng Pilipinas (BSP) is reconfiguring its government securities purchasing window into a regular facility as part of its COVID-19 pandemic exit measures.

The central bank is currently reviewing refinements that will be included in the reconfiguration of the government securities window as a standard liquidity instrument.

Outgoing BSP Governor and incoming Finance Secretary Benjamin Diokno said that the redesigned government securities facility will be more structured, similar to the practices of other central banks.

“This is consistent with the BSP’s thrust to develop a broad range of instruments and new operating procedures to fight future crises,” Diokno said.

Meanwhile, the BSP noted that demand for BSP Securities has been strong since their maiden issuance in September 2020.

“Favorable market reception is reflected in the frequent oversubscriptions of these securities,” Diokno said.

Demand for these securities further strengthened with the inclusion of trust entities as eligible participants in the secondary market for BSP Securities effective December 10, 2021.

As the number of qualified participants rose, the central bank noted a gradual increase in trust entities’ holdings of BSP Securities.

The restoration of BSP’s authority to issue securities in 2019 gave the central bank an additional tool for ensuring monetary stability, and greater flexibility in managing liquidity in the financial system under the interest rate corridor framework for monetary operations.

“The BSP will continue to refine its monetary operations moving forward to help ensure that the monetary policy stance is transmitted to the economy through short-term interest rates,” Diokno added.

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