CEBU City councilors cautioned the City treasurer in choosing a new depository bank, and asked her to give more weight to the bank’s stability, rather than the high interest rates they are offering.
City Treasurer Ofelia Oliva sought the City Council’s authority in opening an account with United Coconut Planters’ Bank (UCPB) and in depositing P1 billion into a yen account with Landbank of the Philippines (LBP).
She told the council that Mayor Tomas Osmeña wants to open a yen account and convert P1 billion of the City’s P2.7 billion deposits into yen, as a hedge against currency devaluations.
The Japanese yen, she said, is the third strongest currency after the US dollar and the euro, and converting the City’s assets into yen would protect the City from any devaluation that would cause its loan obligations to shoot up.
The City’s loan for the South Road Properties (SRP) is in yen.
If the value of the dollar is stronger than the yen, a councilor asked why the City shouldn’t convert its money into dollars instead.
Oliva told reporters that the value of the dollar fluctuates more often, and the value of the yen is expected to increase around August, when the City is scheduled to pay its loan dues.
“It’s better to place our money in a yen account because our loan is in yen. The mayor said it’s better to convert it to yen because if the dollar is down but the yen is strong, we will incur some losses,” she told the council.
Each time the City pays its SRP loan amortization, it has to buy dollars, which in turn is converted into yen, since the dollar is the standard currency of exchange.
The council noted Oliva’s comments on the proposals to open a yen account and to engage the services of UCPB, and asked to review them further when the resolutions are submitted to the council.
Oliva plans to canvas which of the banks can offer the highest interest rates to help the City Trea-surer’s Office (CTO) decide where it will open a time deposit account.
But some councilors did not agree, saying that a bidding will still be the most transparent way of identifying which bank to transact with.
UCPB offered the City a 3.5 percent interest for its time deposit, which Oliva said is better than most of the City’s depository banks.
Vice Mayor Michael Ra-ma also said that instead of identifying which of the banks can give the City the highest interest rates, the City should give more weight to the bank’s financial position and stability.
He told Oliva that the council is more concerned with losing the City’s money, rather than getting the highest interest rates.
The vice mayor recalled an incident when one of the depository banks was quick to garnish the City’s money as payment for an expropriated lot.
“I don’t want that to happen again,” Rama said. “We should not be too greedy. The next thing we know, our money is gone because of a bank run or the garnishment of our funds.”