The Bangko Sentral ng Pilipinas’ (BSP) loans and advances to both banks and non-banks increased by 49.7 percent to P124.7 billion by the end of October 2024 compared to the same period in 2023 of P83.3 billion.
This was the highest total loans and advances since 2021 of P121.8 billion. In 2022 and 2023, the BSP recorded P83.2 billion and P83.3 billion, respectively, in total loans and advances, based on BSP data.
The BSP extends loans and advances to supervised financial institutions with liquidity issues.
Banks can apply for discounts, loans, and advances from the BSP when under “precarious financial condition” or under serious financial pressures.
The BSP can also grant emergency loans or advances to banks with liquidity problems so long as these are not insolvent.
Any bank can tap the emergency loan or advance facility during “periods of financial panic” which is a situation that “directly threaten monetary and banking stability” with “extraordinary heavy withdrawals of deposits for successive days”.
Banks can also ask the BSP for a loan or advance during normal periods when they have liquidity pressures due to unforeseen events.
There have been lower loans and advances post-pandemic since the regulatory relief measures to banks and non-banks during the Covid crisis resulted in fewer availments of its loan facilities such as the rediscounting windows.
Loans and advances to the Philippine Deposit Insurance Corp. accounted for a large portion of BSP releases, while the rest are channeled through its loan facilities that have fixed terms and lending rates.
Last December 2024, the BSP replaced its rediscounting facility with the discount window facility or DWF.
The DWF enables banks to offer government-issued securities and central bank bills directly in exchange for advances against these securities.
The DWF will also have new credit scores under the Credit Information System or CRIS, as well as additional application procedures for the DWF line. This will depend on a bank’s credit score under the CRIS guidelines, ranging from 25 percent to 100 percent of adjusted capital.
The loan value is up to 80 percent of the current government and BSP securities market value.
During the pandemic, the government became the highest borrower from the BSP after taking out P1.1 trillion in 2021. This increased the BSP loans and advances by 90.5 percent versus P566.9 billion in 2020.
The BSP’s charter allow it to extend provisional advances as a temporary arrangement with the government for cash resources while revenue generation is still relatively inadequate due to the pandemic and lockdowns. The first loan was granted in March 2020 in the amount of P300 billion. The following extensions were raised to P540 billion in October 2020, January 2021 and in April 2021.
The BSP can advance to the government a max of 20 percent of the National Government average income for the last three years.