For the first six months of the year, no bank has availed of the Bangko Sentral ng Pilipinas’ (BSP) peso and foreign currency-denominated rediscounting facilities because of adequate liquidity in the financial system.
Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines. The facility helps banks meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
The BSP considers most local banks as awash with liquidity at the moment, and are healthy capital-wise with enough buffers, especially with the recent reduction in reserve requirement ratios to single-digit levels.
In a statement on Friday, July 7, the BSP said for the period January 1 up to June 30, there were no releases under the Peso Rediscount Facility and Exporters’ Dollar and Yen Rediscount Facility (EDYRF).
Meanwhile, effective on July 10, the BSP’s peso rediscounting rates is 7.3316 percent for 1-90 days loan maturity, and 7.4132 percent for 91-180 days. For the EDYRF, there has not been any availment since 2016.
The peso rediscount rates are based on the BSP overnight lending rate, while the EDYRF rates are based on the applicable benchmark rates. “The applicable spread, as may be determined by the BSP, may change periodically to complement the changes in the BSP’s monetary policy goals and reflect movements in market interest rates,” said the BSP.
Earlier this year, the BSP issued a new circular amending and clarifying the lending rates for the EDYRF after the discontinued use of LIBOR or the London Inter-bank Offered Rate in Dec. 31, 2021. After June 30 this year, the BSP has replaced LIBOR with its own overnight reference rate.
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.
Rediscounting allows eligible papers such as credit instruments including promissory notes, drafts or bills of exchange for commercial credits.
Production credits are also allowed which are used for production or processing of agricultural, animal, mineral, or industrial products.
Other credits or special credit instruments such as, but not limited to, microfinance, housing loans, services, agricultural loans with long gestation period, and medium and long-term loans are also accepted.
Last year, the BSP released P15.3 billion of peso rediscounting loans.