BSP extends P11.6 B rediscount loans in H1

The Bangko Sentral ng Pilipinas (BSP) has extended peso rediscount loans amounting to P11.6 billion to big banks in the first half of the year to finance capital asset expenditures.

Rediscounting is one of the credit facilities offered by the BSP 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 their end-user borrowers.

The eligible papers include credit instruments, such as promissory notes, drafts or bills of exchange of commercial credits, production credits, and other credits.

Bulk or 97.72 percent of the total rediscount loans from January to June this year were used to finance capital asset expenditures, while the remaining 2.28 percent funded importation activities.

For the month of June alone, peso rediscount loans extended by the central bank amounted to P7.5 billion.

The applicable rediscount rate on loans under the peso rediscount facility was set at 3.3969 percent for loans with a loan maturity of up to 90 days, and 3.7938 for 180 days for July.

According to the BSP, there was no availment under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) in the first four months of the year.

The peso rediscounting loans extended by the central bank plunged for the second straight year in 2021 amid the massive liquidity released by the central bank in the financial system via its COVID-19 response measures.

Data released by the central bank showed total availments of banks against their rediscounting loans reached only P6.12 million for loans under the peso rediscount facility last year versus the P26.9 billion availed in 2020.

The bulk or 65.35 percent of the total availments represented the rediscount of production credits, particularly for industrial processing, followed by other credits that funded capital asset expenditures with 24.81 percent, and permanent working capital with 9.84 percent.

The decline in rediscounting availments last year was attributed to the banks’ high liquidity position, coupled with the deceleration of bank lending due to weaker corporate sector performance amid the global health crisis.

Despite the decline, banks continue to recognize BSP’s rediscount facilities as a funding option should liquidity no longer be sourced from the market. About 50 banks maintain rediscounting lines with the BSP as part of their contingency funding plan.

After emerging as one of the most aggressive central banks in the world in 2020 and maintaining an accommodative stance, the BSP has finally raised policy rates, delivering a 25 basis points rate hike in May 19, the first in more than three years or since November 2018.

This was followed by another 25 basis points last June 23, as inflation remained elevated above the two to four percent target on soaring global oil and non-oil prices.

The regulator’s COVID-19 response measures unleashed P2.3 trillion into the financial system – including the zero spread on its peso rediscount loans until the end of June this year to allow banks to tap the facility to meet their temporary liquidity needs with the emergence of the more contagious Omicron variant.

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