Banks maintain P320.80 B rediscounting lines with BSP

Published November 5, 2020, 5:29 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said there are 50 banks, of which 17 are big, that have active rediscounting line amounting to P320.80 billion with the central bank of end-September this year.

These banks continue to avail of the BSP rediscounting facility as temporary relief measures and for liquidity requirements.

From January to October, the rediscounting loan releases did not move at P26.90 billion and the 17 big banks accounted for P25.92 billion of this amount. Compared to same time in 2019 however, availments were down by 77 percent from P118.67 billion.

“This may be due to the banks’ high liquidity position combined with the slowdown in bank lending as a result of weaker business activity,” said Diokno during his regular chat with the press. “Nevertheless, banks recognize BSP’s rediscount facilities as a funding option.”

The 50 banks that are maintaining rediscounting lines with the BSP do so as part of their contingency funding plan, he said. Besides the 17 universal and commercial banks, there are also nine thrift banks and 24 rural and cooperative banks with rediscounting lines.

The rediscounting facility which used to have a revolving budget, currently is in an “open-regime” set up.

“Amid the pandemic, BSP deployed temporary relief measures in its rediscounting facilities. These measures are in place until end-January 2021,” said Diokno. The temporary relief measures relating to rediscounting availments ensure the availability of credit to productive economic sectors. They did this by lowering the effective lending rates to encourage banks to lend to businesses hit by the COVID-19 pandemic.

The temporary measures include: the reduction of the term spread on rediscounting loans under the BSP’s Peso Rediscount Facility and Exporters’ Dollar and Yen Rediscount Facility; acceptance for rediscounting of US dollar and Yen-denominated credit instruments for economic activities listed in the Department of Trade and Industry Memorandum Circular No. 20-08, except for loans to banks and capital markets. These economic activities are manufacturing and processing of basic food products, medicine and medical supplies; retail establishments like groceries, supermarkets and drugstores; logistics services; and export and business process outsourcing, among others.

The BSP also temporarily accepts for rediscounting credit instruments loans that were granted one-time 60-day grace period or longer, under the “Bayanihan to Recover as One Act”.

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.

“Rediscounting is a privilege of qualified banks that have approved and active lines with the BSP to obtain loans or advances,” said Diokno. He said dediscounting “influences the volume of credit in the financial system (and) provides liquidity to individual banks and the banking system should liquidity can no longer be obtained from market sources.”