The Bangko Sentral ng Pilipinas (BSP) will still implement a reduced term spread on its rediscounting facility to zero until end-July this year, but the use of credit instruments granted a grace period under the Bayanihan law are no longer accepted.

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.

The previous memo on the temporary, pandemic-related relief measures expired last April 30.

In a new memo (Memorandum No. M-2021-030) signed by BSP Governor Benjamin E. Diokno on Monday, May 3, the Monetary Board also approved the reduction of the term spread on rediscounting loans under the Exporters' Dollar and Yen Rediscount Facility (EDYRF), regardless of maturity of 1-day to 560-day.

The BSP will also continue to accept under the EDYRF credit instruments of businesses or enterprises that were allowed to operate during the enhanced community quarantine, except for loans to banks and capital markets.

However, Diokno in the memo said that credit instruments, which were granted one-time, 60-day grace period or longer under the second Bayanihan law will not be accepted for rediscounting with the BSP after April 30.

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.

Since its first implementation on March 31, 2020, the BSP has extended the relief measures on rediscounting for 5x because most of the country’s economic areas are still on lockdown.

As of the first quarter this year, there were no releases or rediscounting loans since banks are awash with cash. Banks prefer to place or park their funds in BSP’s open market operations, term deposit facility and securities facility versus lending to borrowers amid the pandemic.

There were no availments in EDYRF either, not since 2018.

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.