BSP rediscounting loans unchanged at P15.3 B

Published December 7, 2022, 3:14 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) did not report any activity in the peso rediscounting loans for the month of November, it remained unchanged at P15.3 billion for the first 11 months.

The P15.3 billion rediscounting loans was higher than end-November 2021 of only P6.12 million.

The BSP said on Wednesday, Dec. 7, that there was no availment under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) either. The last availment was in 2016.

Money/File (Manila Bulletin article)

The rediscount rates are based on the latest available BSP overnight lending rate plus spread, while the rates for the EYDRF are based on 90-day London Inter-Bank Offered Rate as of Nov. 30, 2022 plus spread.

The facility released P3.7 billion of rediscounting loans in October, the only time it was active since May this year.

Rediscounting, as defined by the BSP, is a credit facility for qualified banks with active rediscounting lines with the BSP. Banks tap the facility to service their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of their end-user borrowers.

These eligible papers are credit instruments such as promissory notes, drafts or bills of exchange. These include commercial credits, production credits and “other” credits or special credit instruments.

Rediscounting is a privilege of qualified banks that have approved and active lines with the BSP to obtain loans or advances. The facility also influences the volume of credit in the financial system and provides liquidity to individual banks and the banking system should liquidity can no longer be obtained from market sources.

At the beginning of 2022, there were nine big banks or universal and commercial banks, seven thrift banks and 21 rural/cooperative banks with rediscounting lines totaling P227 billion with the BSP.

As of Nov. 30, the peso rediscount rates for 1-90 days are 6.4201 percent and 7.3402 percent for 91-180 days.

Amid the pandemic, the BSP deployed temporary relief measures in its rediscounting facilities to ensure the availability of credit to productive economic sectors. They did this by lowering the effective lending rates to encourage banks to lend to businesses hit by the Covid-19 health crisis.

The temporary measures include: the reduction of the term spread on rediscounting loans; and the acceptance for rediscounting of US dollar and yen-denominated credit instruments for economic activities listed in the Department of Trade and Industry Memorandum Circular No. 20-08, except for loans to banks and capital markets.