The Market Monitor Minding the Nation's Business
By Jerry Maglunog
With the inflation rate stable, the Bangko Sentral ng Pilipinas (BSP) has decided to close down its so-called special deposit account (SDA) window which has attracted more than P2 trillion in deposits.
“It’s a huge amount that earns almost nothing because of the very low interest now offered by BSP; no other remedies for it except to bring it to other avenues where interests are higher,” Belle Tiongco, chief marketing officer of Pru Life UK, said.
SDAs are fixed-term deposits by banks and trust entities of BSP-supervised financial institutions with the BSP. SDA was among the tools the BSP used to mop up excess liquidity in the financial system.
BSP expanded the access to the SDA facility to allow trust entities of financial institutions under BSP supervision to deposit in the facility.
Aside from SDA, there are two other avenues where money is best kept to earn comfortable interest, unit investment trust fund (UITF) and unit-linked funds. UITF is the option where clients, whether banks or individuals, manage their funds alone while unit-linked funds is combined with other plan holders.
This type of fund gives the client opportunity to invest in a much wider spread of investments than if to invest on UITF which however usually gives higher returns.
Along with the other plan holders who invest in the unit-linked funds, the investor shares in the investment performance of the assets.
Pru Life has just launched the so-called elite protector 5, the newest instrument that gives an investor five times the amount he or she invested unless the terms of payment is not completed.
Tiongco said the money, if it will just be left at the SDA, will not earn as much, not even one-fourth of the interest offered under their latest instrument. “There is plenty of money in the Philippines.
The problem is there are not many investment avenues except UITF and unit-linked funds. “Here is the enhanced alternative, that’s why those banks that have plenty of funds left at SDA should think very carefully rather than using their money to buy government securities,” the insurance executive added.