Philippines slashes special deposit account interest rate

Philippine central bank lowers its short-term SDA facility by 3.125bps.

According to Daily Edge, the Philippine central bank (BSP) slightly lowered the interest rate of its short-term special deposit account (SDA) facility by 3.125bps. This comes after the BSP also prohibited banks from placing foreign funds in SDAs. The new SDA rate effectively lowers the net yield by 2.5bps.

"Due to this, BSP will likely save more than PHP500m annually in interest expenses (PHP250m for the rest of 2012). Amid low-interest rates and limited investment alternatives, we believe domestic investors would likely keep their funds in SDAs. Also, this could slightly lower banks’ funding costs on time deposits as these are pegged on SDA rates."