BSP releases P4-B rediscounting loans

Published May 10, 2022, 4:15 PM

by Lee C. Chipongian

Only one big bank has availed of the central bank’s rediscounting facility in the first four months of 2022, borrowing P4.1 billion for liquidity purposes.

The Bangko Sentral ng Pilipinas (BSP) on Tuesday, May 10, said the unnamed universal bank has availed of the peso rediscounting loan while applicable rate is still at 2.50 percent. During the same period in 2021, there were zero rediscounting loans.

Banks are still awash with cash and they prefer to place or park their funds in BSP’s open market operations, term deposit facility and securities facility, for interest earnings.

The BSP said there are also no availments for the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) as of end-April. 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.

During the pandemic, the BSP applied a temporary zero-rate rediscounting as part of relief measures to banks. This meant that the term spread on peso rediscounting loans relative to the BSP’s overnight lending rate, regardless of maturity, from 1-day to 180-days, remains at 2.50 percent.

The BSP will apply its reduced term spread on its rediscounting facility until June 30 this year and this will be the final extension, according to BSP Governor Benjamin E. Diokno.

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.

Last year, the BSP released only P6.12 million under the peso rediscounting facility.