BSP’s total deposits at K13.5bil

By SHIRLEY MAULUDU
BANK South Pacific’s (BSP) total deposits in Papua New Guinea is approximately K13.5 billion, group chief executive officer Robin Fleming says.
Fleming told The National that like all other banks in the country, the bank raised all of its deposits for lending from its customers.
“BSP PNG, like all other banks in PNG, raises all of its deposits for lending from our customers – not from other banks, Bank of PNG (BPNG) or offshore wholesale markets,” he said. “Of our total deposits in PNG of approximately K13.5 billion, almost K11.7 billion are on call deposit, either cheque accounts or savings accounts, with K1.8 billion in term deposits which attract higher rates of interest for fixed term investments with BSP.”
Fleming said the interest rates on the bank’s term deposits were not linked to the Kina Facility Rate (KFR).
According to Bank of PNG (BPNG), the KFR was introduced in February 2001, as an official rate to indicate its stance of monetary policy. The KFR is a monthly rate and any changes to it should translate to market interest rates.
In March, BPNG governor Loi Bakani announced a change in its monetary policy settings, as PNG’s economy had to adjust to business downturns due to Covid-19, with an announcement that KFR would be reduced by two per cent. “When the KFR was reduced by two per cent, this did not change the cost of BSP’s deposits, but BSP recognising the need to provide relief to lending customers who were experiencing difficulties as a result of economic slowdowns due to the Covid-related restrictions, responded to the reduction in the BPNG KFR signalling rate by reducing its ILR (indicator lending rate) by one per cent,” Fleming said.
“As advised to the market at the time this reduction in lending rates is not fully offset by lower deposit rates and BSP’s net interest income from lending has reduced as has our net profit after tax.
“For liquidity, management purposes Bank of PNG had required all commercial banks to hold 10 per cent of our total deposits which we have sourced from our customers to be held with Bank of PNG at zero per cent interest, which is known as the cash reserve requirement (CRR).
“These are deposits independently sourced by banks from our customers not funds lent to commercial banks by Government or Bank of PNG.
“When the Bank of PNG reduced its CRR by three per cent, this released around K380 million of BSP’s own customer deposits back to BSP to improve liquidity for lending to customers.”