Rediscount rates raised after fresh tightening move by BSP

RATES CHARGED on rediscount loans availed by banks have risen beyond the four percent level starting this week, reflecting higher benchmark yields set by the Bangko Sentral ng Pilipinas (BSP).

In a statement, the central bank said rediscount rates for peso loans secured by banks have been adjusted upward effective Monday.

Loans maturing in 90 days or lower are charged a 4.0625% rate while 180-day credit lines carry a 4.125% spread.

The changes reflect the fresh 25-basis-point adjustment in policy rates during the Monetary Board’s June 20 review, which follows a rate hike of a similar magnitude during their May meeting.

The rediscount facility lets banks to get hold of additional money supply by posting their collectibles from clients as their collateral. In turn, they can use the fresh cash to grant more loans or service unexpected withdrawals.

The BSP provides these short-term loans in the peso, dollar or yen. The window also allows the central bank to fulfill its mandate of being a “lender of last resort” should banks find themselves short of liquidity.

The BSP through Circular 1008 eased its rules on rediscount borrowings as it will soon accept syndicated loans and credit lines with underlying real estate collaterals as acceptable collateral, which will essentially allow lenders to avail of bigger amounts.

The central bank also lifted the P3-billion cap per bank on using collectibles from National Food Authority papers for rediscount credit.

Currently, the BSP accepts a bank’s loan collectibles like bills, promissory notes, letters of credit, trust receipts, property mortgages, credit guarantees and debt papers in awarding rediscount credits.

The rediscount rates are computed based on the BSP’s overnight lending rate — which is now at four percent — plus term premia.

Policy makers saw the need for a back-toback hike to rein in inflation, as expectations for price increases “remain elevated” for the rest of 2018. The adjustment is also timely as the central bank saw “more volatility” in the exchange rate.

Inflation logged 4.6% in May, the fastest climb seen in at least five years. This brought the year-to-date tally to 4.1%, higher than the central bank’s 2-4% target. Meanwhile, the peso has been trading at the P53 level versus the dollar since mid-June, touching fresh 12-year lows.

Total rediscount borrowings reached P8.917 billion as of end-May, well above the P15 million availed during the comparable period in 2017.

Nearly half of the loans were acquired to finance capital asset spending while borrowings for commercial credits took a 43.87% share, according to latest available BSP data. •