Fixed rediscounting rate extended

Published August 3, 2021, 4:43 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) is extending its reduced term spread on its rediscounting facility to zero for another five months or until end-December 2021.

The BSP memo (Memorandum No. M-2021-042), signed by BSP Governor Benjamin E. Diokno last July 30, said the temporary, pandemic-related measures will still apply to the both the peso and the US-dollar and Japanese-yen rediscounting facility.

The previous memo expired end-July. With the extention, 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. This is the sixth time that the temporary relief measure has been extended by the Monetary Board.

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. The rediscounting loans are classified by type of underlying credit such as commercial, production or other credits based on the eligible papers offered by banks as collateral.

After nine months of zero availment, the BSP’s rediscounting facility moved by a mere P4 million in June. The Exporters’ Dollar and Yen Rediscount Facility has been left untapped since 2016.

At the end of 2020, about 50 banks have an active rediscounting line with the BSP amounting to P321 billion, of which 17 are universal and commercial banks. The rediscounting lines are also part of banks’ contingency funding plan.

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.