The Bangko Sentral ng Pilipinas (BSP) has increased the rates it charge on its peso rediscount facility for both the 1 to 90-day maturity and the longer-dated 91 to 180-day tenor.
Effective today, Friday, Nov. 8, the 1 to 90-day rediscounting loans will have a higher rate of 7.3596 percent versus 7.1420 percent previously (Oct. 18), while for the 91-180 days, the rate is also higher at 7.7192 percent from 7.2840 percent.
The rediscounting facility which will be replaced by the discount window facility (DWF) in December, operates as a temporary liquidity loan for banks to extend to their clients with eligible papers such as credit instruments including promissory notes, and drafts or bills of exchange for commercial credits. It is also a credit facility to qualified banks with active rediscounting lines.
The peso rediscount rates are based on the BSP overnight lending rate, while the US dollar and Japanese yen rediscount rates under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) are based on applicable benchmark rates
The EDYRF rate for US dollar-denominated rediscounting loans are 7.05540 percent for the 1-90 days, 91-180 days and 181-360 days. For the yen-denominated EDYRF, the rates are as follows: 2.38250 percent for the 1-90 days; 2.44847 percent for the 91-180 days; and 2.53250 percent for the 181-360 days.
The BSP is replacing the rediscounting facility with the DWF to enable banks to directly offer government-issued securities and central bank bills in exchange for advances against these securities.
BSP Circular No. 1202 which will implement the DWF, wants the new facility to influence the volume of credit. Before the circular, the BSP only rediscounts loans with government securities as additional collateral.
The central bank clarified that banks with existing rediscounting line may continue with the rediscounting of eligible credit instruments until they expire.
However, banks with existing rediscounting line planning to avail of advances against securities issued by the government and the BSP will have to apply for a DWF line. This will be treated as a new application.
The DWF will cover the following: rediscounting of credit instruments of banks' end-user borrowers; and advances against securities issued by the National Government and the BSP.
This means DWF lines approved under the new circular can be tapped by banks either by rediscounting loans or by offering their government securities and BSP securities for advances, said the BSP, adding that “banks can tap existing rediscounting lines until these lines expire a year after their effectivity, but only for rediscounting loans.”