No borrowers for BSP rediscounting loans
For the last four months, the central bank’s peso rediscounting facility had no takers from the banking sector.
In a statement on Friday, Oct. 7, the Bangko Sentral ng Pilipinas (BSP) said for January to September, the facility’s aggregate total availments “remain at P11.6 billion” and there was still no availment under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) during the period.
In the same period last year, rediscounting loans amounted to P6.12 million. Meantime, the EDYRF has had no takers since 2016.
Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
At the beginning of 2022, there were nine big banks or universal and commercial banks, seven thrift banks and 21 rural/cooperative banks with rediscounting lines totaling P227 billion with the BSP.
BSP Governor Felipe M. Medalla has said that banks are still awash with liquidity and are healthy capital-wise, with enough buffers.
The BSP has remedial measures to help solvent banks resolve temporary liquidity problems from “causes beyond their control” such as the pandemic. It extends fully-secured emergency loans to banks as financial assistance.
Based on the BSP Charter, the BSP’s financial assistance to banking institutions is limited to the amount needed by the applicant bank to overcome the emergency or financial predicament but should not exceed 50 percent of its deposits and deposit substitutes. In addition, any emergency advance will be collateralized by government securities and other unencumbered first-class collaterals such as real estate.
The BSP’s loans and advances include rediscounting loans and overdraft credit lines.
Rediscounting allows eligible papers such as credit instruments including promissory notes, drafts or bills of exchange for commercial credits.
Production credits are also allowed which are used for production or processing of agricultural, animal, mineral, or industrial products. Other credits or special credit instruments such as, but not limited to, microfinance, housing loans, services, agricultural loans with long gestation period, and medium and long-term loans are also accepted.
The peso rediscount rates are based on the latest available BSP Overnight Lending Rate plus spread, while the rates for the EDYRF are based on 90-day London Inter-Bank Offered Rate as of September 30, 2022 plus spread.
As of Oct. 7, the peso rediscount rates for 1-90 days are 5.6701 percent and 6.5902 percent for 91-180 days.