Wednesday, May 22, 2013

SDA for Individual Investors to be Phased-Out Before the Year Ends

To those who don't know, Special Deposit Accounts (SDA) is an investment option from Bangko Sentral ng Pilipinas (BSP) which aimed to mop excess liquidity in the Philippines. There was a time (I think 2009) when the interest rate was high ~4.5%. Imagine having a low-risk investment with a return of ~4%. This was very enticing to investors, it was certainly better than bank deposits, even time deposits, and was competitive to bond investments.

Now, BSP may want the money out of its system. There's a rumor that SDA will be phased out. Seems there's now too much money parked in SDA (P1.859 trillion as of May 3), and it's not beneficial for the economy anymore. It started with BSP cutting the rates down, from 4+%, down to 3.5%, when it didn't work, it further cut the rates down until it reached the rate we have today which is a mere 2% (gross).

Seems there's some truth to the rumor. New memorandum 2013-021 from BSP implicates that banks can no longer offer SDA to individual investors. SDA is now exclusive to funds in trust and UITFS are allowed to park.

The order also states that by end of July, 30% of current placements should be withdrawn from SDA and the rest should be removed by November 30, 2013.

So if you're an individual and you have placement in SDA, I would suggest that you already look for alternatives. In my earlier post, I recommended BPI Maxi Saver, but you are not limited to that. There's also Bond UITF's and Bond/Fixed-Income Mutual Funds (MF) that offers lower volatility and risk but have moderate returns.



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