No takers for BSP rediscounting loans

The central bank said its rediscounting facility has zero releases for the first two months of 2021 for both the peso and foreign currency-denominated windows because banks are still awash with cash and not lending.

“The Bangko Sentral ng Pilipinas (BSP) updates the public that the applicable rediscount rate for the month of March 2021 on loans under the Peso Rediscount Facility (PRF) remains at 2.50 percent, regardless of maturity,” the BSP said in a statement Wednesday.

The rediscount rates on loans under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) are set at 2.18838 percent for US Dollar and 1.91800 percent for Japanese Yen, regardless of maturity, the BSP added.

“Further, there are no availments under the PRF and EDYRF covering the period January 1 to February 28, 2021,” said the BSP. The EDYRF has had no availments since 2018.

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. 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 are also part of banks’ contingency funding plan.

The BSP has recently extended the temporary zero-rate rediscounting until April 30 this year as part of relief measures to banks while major business areas are still under lockdown, though less severe.

This means that the term spread on peso rediscounting loans relative to the BSP’s overnight lending rate will continue to be zero regardless of maturity, from 1-day to 180-days, or at 2.50 percent.

The BSP also approved the extension of the following temporary measures: reduction of the EDYRF term spread, thereby reducing the applicable US dollar and Japanese yen rediscount rates to the 90-day London Interbank Offered Rate, or in its absence, an applicable benchmark rate, such as the Secured Overnight Financing Rate, plus 200 basis points, regardless of maturity; acceptance for rediscounting with the BSP under the EDYRF of the US dollar and Japanese yen-denominated credit instruments related to the economic activities enumerated in a Department of Trade and Industry memo (Memorandum Circular No. 20-08) except for loans to banks and capital markets; and acceptance for rediscounting with the BSP of credit instruments compliant with the requirements on eligible papers and collaterals under the second Bayanihan law.

In 2020, the BSP released P26.90 billion under the rediscounting facility. This was 77.98 percent lower compared to P122.17 billion in 2019.

The big banks accounted for P26 billion of the total while the rest or almost P1 billion were released to thrift and rural/cooperative banks.

There were less banks that availed of rediscounting loans during the lockdown period, in fact the availments were frozen at P25-27 billion in the last half of 2020 because banks have excess cash following the BSP’s liquidity-enhancing measures as a defensive response to the pandemic. Banks are also risk-averse and not lending to less-confident borrowers while the country is still on a year-long lockdown.

“Bank lending growth continues to wane as the pandemic dampens consumer spending and limits business activities,” BSP Governor Benjamin E. Diokno said in a forum this week. He also noted a BSP survey of bank loan officers that continue to indicate a net tightening of overall credit standards for both loans to enterprises and households.

Still, Diokno sees “a glimmer of hope” with a positive consumer outlook for this quarter and consumer sentiment that remains optimistic for the next 12 months based on the BSP’s latest Consumer Expectations Survey. “This is a natural reaction to the risks heightened by the crisis,” said Diokno.

He also cited the latest Banking Sector Outlook Survey which showed that most banks expect loan portfolios to grow between 10 percent and 15 percent over the next two years. “(This is) a crucial element of the recovery process,” he said.

For the moment, based on BSP data, banks have ample liquidity buffers to “withstand short-term liquidity shocks and to provide adequate stable funding in the medium term,” added Diokno.