BSP adopts new pricing for rediscounting loans

The Bangko Sentral ng Pilipinas (BSP) has adopted a new pricing structure for its rediscounting facility in response to changes in monetary management or economic conditions.

BSP Governor Benjamin Diokno said the Monetary Board issued Resolution 1917 on Dec. 13, 2019 approving the amendments to Section 282 of the Manual of Regulations for Banks on rediscount or lending rates as well as liquidated damages.

Under the resolution, the central bank agreed to adopt a flexible term premium in lieu of the fixed term premium in order to arrive at the appropriate rediscount rate.

“Under this policy, the BSP will have the flexibility to recalibrate the rates in response to changes in monetary management and/or economic conditions,” the central bank said.

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.

Eligible papers include credit instruments such as promissory notes, drafts or bills of exchange of the following nature:

Such amendment in the rediscount rates is part of the broader reforms of the BSP to bring its policies in line with its lender of last resort function and to ensure that the rediscounting policies remain relevant to the present and future demands on monetary management.

Effective yesterday, the central bank changed its rediscount rates for the peso and dollar and Japanese yen rediscounting facility.

The peso rediscount rates will remain to be based on the BSP overnight lending rate plus a spread depending on the term of the loan, while the rates for the exporters dollar and yen rediscount facility (EDYRF) will continue to be based on the 90-day London Inter-Bank Offered Rate (LIBOR) plus the spread depending on the term of the loan.

“The appropriate spread for each term of the loan may change periodically to complement changes in the BSP’s monetary policy goals and to reflect movements in the market interest rates,” the BSP said.

The applicable rediscount rates for the peso rediscount facility was pegged at 5.4465 percent for the 90 days and 6.3930 percent for the 180 days, while the rate for the dollar loans stood at 4.85488 percent for 90 days, 5.80138 percent for 360 days as well as for yen loans at 2.89917 percent for 90 days, 3.84567 percent for 180 days, and 5.73867 percent for 360 days.

Loans from the rediscount window of the central bank jumped by 71 percent to a record high of P122.17 billion last year from P71.52 billion in 2018.

Data showed 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 cornered the bulk or 65 percent of the total disbursements under the peso rediscount facility.

Loans for capital asset expenditures cornered 38.7 percent, while loans to other services accounted for 19.6 percent, and loans for permanent working capital with a 6.7 percent share.