By Eileen A. Mencias

An informal agreement among big banks aimed at ensuring liquidity in the system shortly after the Lehman Brothers? collapse has expired. Sources said members of the Bankers Association of the Philippines did not extend the agreement in a meeting last month.

The BAP made the agreement at the end of October to help the country deal with the global crisis and an impending credit crunch. The agreement included a voluntary cut in banks? dollar trading limit, stricter processing of dollar sales for outward investments and encouraging banks to lend among themselves under the interbank trading facility.

?We all agreed to keep quiet about it. Essentially, you let it slip into oblivion,? one banker said, on condition of anonymity when asked about the agreement.

The voluntary cut in the dollar trading limit at that time helped ease the demand for dollars in the market.

The Bangko Sentral also floated the idea of slashing the dollar trading limit of banks to just $10 million from $50 million. Banks were reluctant to the proposal and volunteered, instead, to trim their trading limits to half.

Demand for dollars rose in the last quarter of last year, partly due to the central bank requirement of a 100-percent asset cover for foreign currency deposit units. When the price of RoPs, or dollar denominated Philippine government bonds, dropped, the banks needed to purchase more dollars to cover for their deposits.