THE Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP) will expand the repurchase agreement (repo) market to include fund managers and trust companies.
To pursue this initiative, a BAP official said the Money Market Association of the Philippines (MART), Fund Managers Association of the Philippines (FMAP), and Trust Officers Association of the Philippines (TOAP) are working on their inclusion in the government securities repo market.
“The repo market is actually open to all GSEDs (Government Securities Eligible Dealers), and we are looking to expand the participants to include non-GSEDs,” said Toni Bautista, president of the National Association of Securities Broker Salesmen Inc. (Nasbi) and head of financial markets sales at Standard Chartered Bank.
“My estimate is we have around seven to 10 banks which can deal now in the MART GS repos, but we have a lot of [other] banks… working on the GMRAs with each other,” Bautista noted.
“Market development took time because GMRAs had to be executed, and then the pandemic hit in 2020,” she explained.
“Currently, the trust entities are speaking with BIR to expand Revenue Memorandum Circular (RMC) 095-17 on the MART GS repos outlining DST exemption for GSEDs only,” Bautista pointed out. “We heard the BIR is supportive, but waiting for an official response. FMAP and TOAP are [also] talking to BIR.”
Last week, the BSP and BAP announced the enhancement of the Philippine Interest Rate Swap (Peso IRS) and the repo market for government securities. These tools would help banking clients manage risks and exposures more effectively to contribute to market growth.
BAP open market committee chairman Paul Raymond Favila previously said the move will improve short-term benchmarks and the country’s capital markets.
BDO Private Bank, Maybank Investment Banking Group, Mizuho Bank, Mitsubishi UFJ Financial Group, and Sumitomo Mitsui Banking Corp. have formally signed to participate in the peso IRS.
Favila said the enhanced Peso IRS will be operational once the International Swaps and Derivatives Association (ISDA) approves the overnight reference rate (ORR).
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