BSP to modify govt securities window

THE Bangko Sentral ng Pilipinas (BSP) will transform its government securities (GS) purchasing window into a regular facility, central bank Governor Benjamin Diokno announced on Monday.

“Reconfiguring the GS window into a regular facility that can operate under normal and crisis conditions ensures consistency with overall monetary strategy,” Diokno told a briefing.

“This is consistent with the BSP’s thrust of developing a strong arsenal of instruments and new operating procedures to address future crises,” he added.

The broad strategy for the reconfiguration involves three stages, starting with the scaling down of purchases.

“While the GS window is not being closed, the BSP will scale down its daily GS purchases as it works toward shifting the GS window into a regular facility under the IRC (interest rate corridor) framework.

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Nevertheless, the facility could be swiftly reactivated if justified by market conditions,” Diokno said

The BSP will then tweak the GS window’s features for consistency with the IRC framework, which is used for guiding short-term market rates toward the BSP policy rate.

“Consistent with the overall monetary strategy as guided by liquidity forecasts, the GS window will be converted from being a standing facility into an active operation at the discretion of the BSP,” Diokno said.

“Similar to other central bank practices, the GS window is envisioned to have a formal and transparent structure,” he added.

Lastly, the BSP will relaunch the GS transactions window as part of the IRC framework.

“Once the new features of the facility have been determined, the BSP will formally re-launch the GS outright transactions window as a regular liquidity facility under our IRC framework. This will include market-sounding activities as well as technical assistance from international institutions,” Diokno said.

He gave assurances that the BSP would communicate its policy intentions and operational refinements to allow the public to prepare and adjust to the GS window reconfiguration.