BSP eyes further easing of rediscounting rules

Defense vs impact on PH of adverse developments overseas

THE CENTRAL bank is open to the further liberalization of its peso rediscounting facility to ensure the availability of the cash needed to keep the economy running in the face of external shocks.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said avoiding tightness in liquidity would be the country’s main defense against any crisis from overseas, particularly the possibility of a US debt default that threatens to freeze credit markets across the globe.

“We have a package of measures that we could consider deploying should there be significant liquidity strains stemming from the challenges that could affect global financial markets and more broadly the global economy,” Tetangco told reporters.

One such measure, Tetangco said, could be adjustments in rules that would make it easier for local banks to access the BSP’s peso rediscounting facility. The peso rediscounting facility allows local banks to exchange their receivables at a discount for cash from the BSP in case they are temporarily short of funds.

The BSP currently has a budget of P20 billion rediscounting loans for banks. By Nov. 15, rediscounting will be an “open-volume” facility, which means banks may avail themselves of as much funds as they want.

“Requests of banks to the facility will be granted regardless of amount, subject to compliance with predetermined eligibility requirements,” Tetangco said.

The removal of the limit to funds that banks can get from the BSP through the rediscounting facility is in line “with the objective of reorienting the BSP rediscounting window as a regular liquidity standing facility,” the BSP earlier said.

The changes in the rules for rediscounting were introduced last August. In a separate circular, also issued in August, the BSP said it had broadened the range of qualified collateral for its Export Dollar and Yen Rediscounting Facility.

This made the foreign currency facility more accessible to banks that might need the extra funds to serve the needs of their customers engaged in exporting goods from the country.

“The BSP remains committed to providing the appropriate level of liquidity to the banking system to ensure sustained funding for the country’s growth requirements to the extent that the inflation outlook will allow,” the regulator said in a previous statement.