The Bangko Sentral ng Pilipinas (BSP) has reduced the rates of its discount window facility (DWF), formerly the peso rediscount facility, for the one to 90-day maturity and the longer-dated 91 to 180-day.

Effective on Dec. 10, the one to 90-day interest rate is 7.2954 percent compared to November’s 7.3596 percent, while the 91-180 days’ rate is also lowered to 7.5908 percent from 7.7192 percent previously.

The peso DWF rates are based on the BSP overnight lending rate, while the US dollar and Japanese yen rates under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) are based on applicable benchmark rates.

The EDYRF rate for US dollar-denominated DWF loans are reduced to 6.96700 percent for the one to 90 days, 91-180 days and 181-360 days. For the yen-denominated EDYRF, the rates are as follows: 2.47300 percent for the one to 90 days; 2.53375 percent for the 91-180 days; and 2.64950 percent for the 181-360 days.

“The appropriate spread on DWF interest rates, 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.

The BSP replaced the peso 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.

Based on BSP Circular No. 1202 which implemented the DWF, the new facility will influence the volume of credit. Before the circular, the BSP only rediscounts loans with government securities as additional collateral.

The central bank said 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.

The 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.

Meanwhile, banks are allowed to use existing rediscounting lines until they expire a year after their effectivity, but only for rediscounting loans.

Eligible credit instruments accepted under the DWF are: interbank loans; extended/restructured loans; past due loans; unsecured loans: personal consumption loans; loans to non-banks; and loans funded from other borrowings such as government financial institutions or multilateral agencies.