The Bangko Sentral ng Pilipinas’ (BSP) total loans and advances to banks by end-November 2020 increased to P680.76 billion, or 3x more than what was reported same period in 2019.
The surge in the BSP loans and advances were reported in June up to November last year, compared to declines recorded during the most severe months of the lockdown period up to May. By June, the government has lifted the strictest community quarantine status over Metro Manila and other parts of the country.
BSP loans and advances grew by 233.66 percent in the January to November period from P204.03 billion previous year. There were a large number of releases by the third quarter. In end-May, before the enhanced community quarantine or ECQ restrictions were lifted, there were only P174.38 billion loans and advances.
Banks can apply for discounts, loans and advances to BSP when under “precarious financial condition” or under serious financial pressures. During the most severe lockdown months, BSP issued a set of regulatory relief measures to banks and non-banks resulting to less availments of its loan facilities such as the rediscounting windows.
Loans and advances to the Philippine Deposit Insurance Corp. accounted for a large portion of BSP releases, while the rest are channeled through its loan facilities that have fixed terms and lending rates.
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.
Banks can also tap the BSP’s emergency loan facility and overdraft clearing line or OCL.
As of end-2020, the BSP rediscounting facility released P26.90 billion, 77.98 percent lower than P122.17 billion the year before, because banks have excess cash from the BSP’s P2 trillion liquidity infusion to the financial system as a defensive response to the virus outbreak.
About 50 banks have an active rediscounting line with the BSP amounting to P321 billion last year, of which 17 are universal and commercial banks. The rediscounting lines were part of banks’ contingency funding plan.