Banks snub BSP rediscounting loans for 8 months

The Bangko Sentral ng Pilipinas (BSP) said Thursday, Sept. 7, that there were no availments or loan releases from its Peso Rediscount Facility for eight months, or from January to August this year, amid sufficient domestic liquidity in the financial system.

This was in stark contrast to some P11.6 billion that banks took out as rediscounting loans in the same period in 2022, based on BSP data. By the end of 2022, total rediscounting loans amounted to P15.3 billion.

Meanwhile, the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) for the same period also has zero availment. The last time banks tapped the EDYRF was in 2016.

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 banking system, already liquid to begin with, has excess money supply with the reduction in reserves requirement ratio (RRR) last June 30.

The BSP said that effective Sept. 8, the applicable rediscounting rates for the peso-denominated facility is 7.5036 percent for 1-90 days loan maturity, and 7.7572 percent for 91-180 days.

The peso rediscount rates are based on the BSP overnight lending rate, while the EDYRF rates are based on the applicable benchmark rates.

The BSP said the applicable spread may change periodically to complement the changes in the BSP’s monetary policy stance and movements in market interest 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.

The BSP recently reduced both banks and non-banks’ RRR to single-digit levels to unleash fresh funds into the financial system of as much as P360 billion.

The RRR of the big banks and non-bank financial institutions was reduced by 250 bps, digital banks by 200 bps, and 100 bps for thrift banks, rural and cooperative banks.

All universal and commercial banks’ RRR as well as non-banks with quasi-banking functions is now at 9.5 percent from 12 percent, while digital banks’ RRR is at six percent from eight percent. Thrift banks’ RRR was cut to two percent from three percent, while rural and cooperative banks have an RRR of one percent.

The new ratios will apply to the local currency deposits and deposit substitute liabilities of banks and non-banks, said the BSP.

Changes in RRR have a significant effect on money supply in the banking system.