The Bangko Sentral ng Pilipinas (BSP) has extended for the third time the temporary relief measures for its rediscount facilities until January 31 next year.
The previously granted temporary measures lapsed on September 30. This is the third time that a fixed rediscount term as relief to banks has been extended by the Monetary Board. This refers to the extension of the reduction of the term spread on peso rediscounting loans relative to the BSP’s overnight lending rate to zero regardless of maturity, from 1-day to 180-days.
Based on BSP Memorandum Order No. M-2020-076 which BSP Governor Benjamin E. Diokno signed on September 29, the temporary measures implemented in the BSP’s rediscount facilities was extended until end-January 2021.
Aside from the reduction of the peso rediscounting term, the MO also includes the reduction of the term spread on rediscounting loans under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF). This cuts the applicable US dollar and Japanese yen rediscount rates to the 90-day London Interbank Offered Rate or an applicable benchmark rate, such as the Secured Overnight Financing Rate, plus 200 basis points, regardless of maturity, according to the memo.
Except for loans to banks and capital markets, the extended temporary measures also allow US dollar and yen-denomintated credit instruments so long as these are related to economic activities under the Department of Trade and Industry’s ruling (DTI Circular No. 20-08 on March 20).
“These credits are booked under the regular banking unit of the rediscounting bank and are compliant with the requirements on eligible papers and collaterals (under BSP rules),” the memo said. The US dollar and yen-denominated credits are “only to those end-user borrowers operating during the enhanced community quarantine.”
Diokno in the memo also said that the Monetary Board has approved the acceptance for rediscounting with the BSP of credit instruments that are “compliant with the requirements on eligible papers and collaterals” which were “granted one-time 60-day grace period or longer as may be mutually agreed by the parties” based on the “Bayanihan to Recover as One Act”.
“Banks are expected to comply with the availment and submission procedures” as detailed in several BSP memo issuances in March, April, June and July.
As for credit instruments that were given 30-day grace period in April, these will no longer be accepted for rediscounting after September 30.
Diokno has said that the rediscount rates was still in line with its accommodative stance to further ease the cost of borrowing and ensure ample credit and liquidity in the financial system as the government eases quarantine restrictions and the COVID-19 economy in recession will gradually recover.
Qualified banks can avail of the BSP’s rediscounting credit facility for temporary liquidity requirements by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers. Accepted eligible papers or credit instruments are classified as commercial credits, production credits and other credits.
As of end-August, rediscounting releases remained at P20.70 billion, unchanged since April this year. There are still no availments under the EDYRF. In the same period last year, loans rediscounted by the BSP totaled P116.57 billion.