Rediscount borrowings climb ahead of holidays
MORE BANKS tapped the central bank’s rediscount window in December to get hold of fresh money supply, at a time of strong demand for cash for the holidays.
Peso rediscount loans reached P447 million last month, rising from the P171 million availed by local lenders in November and P11.5 million borrowed in December 2016, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Banks may borrow from the BSP’s rediscount facility in order to meet short-term funding if their usual supply of cash falls short of client demand. This also allows the central bank to fulfill its duty as lender of last resort.
The window lets banks submit promissory notes from outstanding debts as collateral to acquire fresh money supply. The cash can then be used to grant more loans or service withdrawals.
The December borrowings brought the full- year tally to P1.591 billion, well below the P10.767 billion in total rediscount loans secured by Philippine banks in 2016.
Around 94.5% of the amount has been allotted for additional corporate lending, the BSP said in a statement. The remainder went to the services sector (4.2%), housing (0.9%), and production (0.4%).
Banks returned to using the rediscount window after the central bank streamlined the rates imposed on these borrowings.
Since July 21, all rediscount loans are charged a uniform rate after the BSP shut down the special window for thrift, rural and cooperative banks. The central bank took away the preferential rates imposed on small lenders due to low availments, with the view that these players do not need the facility in order to remain liquid.
Two rates are imposed for short- term peso borrowings secured by banks: 90-day loans are charged a 3.5625% rate, while 180-day credit lines carry a 3.625% spread. This is computed based on the BSP’s overnight lending rate at 3.5% plus term premia.
Meanwhile, the central bank’s rediscount window for foreign currencies remained unused for the entire 2017. In particular, the facility for dollar- denominated debts has been untapped since June 2015.
For January, rates for dollar loans have risen to 3.69428% for 90- day loans; 3.75678% for 91to 180-day loans; and 3.81928% for 181- to 360- day loans. This follows a fresh interest rate hike introduced in the United States in December, which has triggered a pickup in global yields.
In contrast, yen-denominated borrowings will see lower margins at 1.97583% for one to 90-day loans, 2.03833% for 91- to 180-day loans, and 2.10083% for 181- to 360-day loans.
Central bank officials have said that there is ample liquidity in the financial system, leaving local lenders with enough cash to service day-to-day transactions. •