The Bangko Sentral ng Pilipinas (BSP) will refine its liquidity absorbing facilities and reconfigure its government securities purchasing window as part of normalization and pandemic exit strategy.

BSP Governor Benjamin E. Diokno said on Monday, June 13, that the BSP’s review of refinements is included in the three-stage reconfiguration of the government securities window as a standard liquidity instrument.

The facility is expected to be more structured, similar with other central banks. When the reconfiguration is completed, the BSP will re-launch the government securities outright transactions.

"This is consistent with the BSP’s thrust to develop a broad range of instruments and new operating procedures to fight future crises," said Diokno during his weekly virtual press briefing on Monday.

Meantime, the outgoing BSP chief said the issuance of BSP securities is vital as the central bank gradually withdraws its pandemic-related measures.

“In line with its exit strategy, the BSP will recalibrate its monetary operations to ensure that the monetary policy stance is effectively transmitted to the economy through short-term interest rates,” he said.

Diokno said reconfiguring the government securities window into a regular facility that can operate under normal and crisis conditions ensures consistency with the overall monetary strategy and BSP's objectives of “developing a strong arsenal of instruments and new operating procedures to address future crises.”

“Toward this end, the BSP will provide timely communication of policy intentions and operational refinements to allow the public to prepare and adjust to operational enhancements,” he added.

The BSP first offered its securities facility on Sept. 18, 2020. "Favorable market reception is reflected in the frequent oversubscriptions of these securities," said Diokno.

The BSP restored its authority to issue securities in 2019 when the central bank charter was amended. The additional liquidity-mopping up tool helps the BSP maintain monetary stability under the interest rate corridor (IRC) framework for monetary operations.

The BSP will recalibrate its government securities buying window in three stages.

The first stage is transitioning by scaling down its purchases while the second stage will conversion from being a standing facility into an active operation at the discretion of the BSP, said Diokno.

“Similar to other central bank practices, the GS (government securities) window is envisioned to have a formal and transparent structure,” he also said.

The third, stage is re-launching the government securities outright 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,” said Diokno.