The Bangko Sentral ng Pilipinas (BSP) has issued a new circular amending and clarifying the lending rates for its US dollar and Japanese yen-denominated rediscounting windows after the discontinued use of LIBOR rates.
The circular memo (Circular No. 1167) which BSP Governor Felipe M. Medalla, signed on Feb. 7, simply removed the 90-day LIBOR or the London Inter-bank Offered Rate, and reiterated that in the absence of LIBOR, an applicable benchmark rate plus spread will be used by the BSP.
The BSP also changed the release date of the applicable rates for both terms of the rediscounting windows from every 10th of every month to every seventh of every month.
The rediscount rates will be posted on the BSP’s website on the next banking day if the seventh calendar day of the month falls on a non-banking day. In case of a change in the BSP’s policy rates, the resulting rediscount rates will be posted on the banking day following the said change in the rates.
It remains that the US dollar and Japanese yen rediscount rates will be based on the applicable spread, as may be determined by the BSP, and may change periodically to complement the changes in the BSP’s monetary policy rates.
The spread between these two rates could be different or may vary based on market interest rates.
Eligible banks can avail of the 1-90 days, 91-180 days, and 181-360 days term facility, subject to applicable rediscounting rates.
Meanwhile, the peso-denominated rediscount rates are based on the latest available BSP overnight lending rate plus spread.
For the month of January 2023, the BSP said there were no availments on the rediscounting lines of banks for all windows, the peso, US dollar and Japanese yen.
In 2022, the BSP released P15.3 billion of peso rediscounting loans. However since 2016, there was no takers for the Exporters’ Dollar and Yen Rediscount Facility.
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.
LIBOR was used by local banks as a reference rate for its foreign currency-denominated transactions such as corporate and consumer loans, bank deposits, fixed income securities, interest rate swaps and cross currency swaps.
LIBOR has been discontinued since December 31, 2021. The LIBOR market was still in transition last year but although its publication has ceased, its rates were still being posted.