Loans and advances released by the central bank to its supervised financial institutions amounted to P130.9 billion by end-fourth quarter 2020, down by 34.61 percent year-on-year or from P200.2 billion.
The Bangko Sentral ng Pilipinas (BSP), which extends loans and advances to banks with liquidity issues, granted P163.7 billion loans and advances in the third quarter last year and P172.8 billion in the second quarter when lockdown restrictions were less severe. This was lower compared to same period in 2019 of P248.8 billion and P301.5 billion, respectively.
In the first three months of 2020, before the pandemic was declared, BSP data showed it released P162.6 billion as loans and advances to banks, down by 50.68 percent from P329.7 billion.
Banks can apply for discounts, loans and advances from the BSP when under “precarious financial condition” or under serious financial pressures. During the most severe lockdown months, the central bank 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.
There was increased loans and advances reported in June up to November last year, compared to declines recorded during the most restrictive 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. There was a bigger number of releases by the third quarter 2020 amounting to P680.76 billion by November.
The BSP grants financial assistance to banks as fully secured emergency loan. It is a temporary remedial assistance for solvent banks with liquidity problems that are beyond their control, such as a sudden cessation of economic and business activities due to a pandemic-induced lockdown.
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 avail of the BSP’s overdraft clearing line.