Deposit Interest Rates Are Rising

Deposit Interest Rates Are Rising

BSP Monitoring Vs. Unsafe Practices

By LEE C. CHIPONGIAN

August 15, 2011, 12:31am

MANILA, Philippines — The banking industry’s deposit interest rates are increasing, triggering a shift of depositors from savings deposit to time deposit in the hope of preserving personal finances amid volatile global and local markets.

This can be gleaned from the Bangko Sentral ng Pilipinas’s (BSP) newest monitoring tool called “Survey on Deposit Interest Rates Per Province,” which has yet to be publicized.

The survey aims to confirm and validate the differences between the rates offered by banks in each province and the rates of time deposits than those for savings deposits. These rates, in fact, have not been decreasing for some time.

The other purpose of the survey is to help the BSP closely monitor any incidence of rising deposit rates, which could signal unsound and unsafe banking practices.

A bank is practicing unsafe and unsound banking by excessive reliance of large, high-cost or volatile deposits/borrowings to fund aggressive growth that may be unsustainable.

According to the report submitted to the Monetary Board, time deposit rates are found to be non-decreasing across categories of deposit balance amounts and across tenor buckets for a given amount of deposit balance.

Depositors, particularly those located in the provinces, have been transferring more of their saved funds to long dated time deposits.

“(This) simply re-state that clients with larger amounts of saving and willing to ‘set aside’ said funds for longer tenors will be rewarded with higher rates,” stated Managing Director Leny Silvestre of the BSP Supervision and Examination Sector in the report.

Based on the survey, banks located in the National Capital Region (NCR) offer savings deposit rate on the average of 0.75 percent for deposits less than P100,000 and 0.63 percent for deposits of more than P100,000.

Deposits of over P1 million also enjoy a 0.75 percent rate. Aurora province however offer the highest savings deposit rate at two percent for less than P100,000 deposits, 2.063 percent for over P100,000 amounts and 2.25 percent for deposits over P1 million.

Of the 46 provinces, which responded that out of a total 80 surveyed, 12 provinces have above one percent offered rates for all deposits. These are Nueva Vizcaya, Laguna, Marinduque, Occidental Mindoro, Oriental Mindoro, Camarines Norte, Aklan, IIoIlo, Negros Oriental, Sarangani, Agusan del Sur and Surigao del Norte. The survey showed no lower rate than 0.5 percent that some provinces offer, including Cebu, Ilocos Norte, Tarlac, Palawan and Sulu, among 15 other locations.

As for time deposits, NCR banks offer 1.6 percent rate for 30-days for deposits less than P100,000, gradually increasing to 3.625 percent for one-year tenors of higher deposits of over P1 million. Some provinces like Laguna, Quirino and Camarines Sur offer two percent rate for 30-day deposits of less than P100,000 but IloIlo and Negros Oriental will give short-term time depositors the highest rates with 2.4 percent and 2.15 percent, respectively.

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