The Bangko Sentral ng Pilipinas (BSP) has reduced the rates on its discount window facility (DWF) for both the one to 90-day maturity and the longer-dated 91 to 180-day tenor.

Effective on Jan. 8, the one to 90-day peso-denominated loans have a lower rate of 6.9529 percent from the previous Dec. 23 rate of 7.0454 percent. For the 91-180 days, the rate is also lower at 7.1558 percent from 7.3408 percent last month.

The DWF replaced the peso rediscounting facility last month. The new DWF interest rates are still based on the BSP overnight lending rate, while the US dollar and Japanese yen rates are pegged on the applicable benchmark rates.

“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 rate for the US dollar-denominated loans is likewise lower at 6.80200 percent as of Jan. 8 for the 1-90 days, 91-180 days and 181-360 days.

For the yen-denominated loans, the rates are as follows: 2.42250 percent for the 1-90 days; 2.49579 percent for the 91-180 days; and 2.61750 percent for the 181-360 days.

The BSP replaced 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.

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

Meanwhile, 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 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. Banks can also tap existing rediscounting lines until these lines expire a year after their effectivity, but only for rediscounting loans.

The DWF will cover rediscounting of credit instruments of banks' end-user borrowers; and advances against securities issued by the National Government and the BSP.

The BSP reduced the key rate or the target reverse repurchase rate by a cumulative 75 basis points to 5.75 percent in 2024. It also cut the overnight deposit rates to 5.25 percent, and the lending facilities to 6.25 percent.