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After cuts in key rates, BSP slashes rediscount charges

Lawrence Agcaoili (The Philippine Star) - February 9, 2020 - 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has slashed the corresponding rates for its peso as well as export dollar and yen rediscount facilities after resuming its easing cycle.

The move was aimed at  preempting  and warding off potential spillovers amid heightened external headwinds.

The cental bank’s Monetary Board lowered the applicable rediscount rates for the peso rediscount facility to 5.19650 percent from 5.4465 percent for the 90 days and to 6.143 percent from 6.3930 percent for the 180 days.

Likewise, the rate for the US dollar loans was reduced to 4.69763  for 90 days, 5.64413 percent  for 180 days and  7.53713 percent for 360 days.

The rate for yen loans was also  slashed to 2.88983 percent from 2.89917 percent for 90 days, 3.83633 percent f for 180 days, and  5.72933 percent  for 360 days.

Last Thursday, the BSP slashed interest rates by 25 basis points to provide additional policy support to boost market confidence amid growing coronavirus fears.

Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.

The central bank said there were no availments under the peso as well as exporter dollar and yen rediscount facilities in January.

Loans from the peso rediscount window of the central bank jumped 71 percent to a record high of P122.17 billion last year.

Late last month, the regulator adopted a new pricing structure for its rediscounting facility in response to changes in monetary management or economic conditions.

BSP Governor Benjamin Diokno said the Monetary Board issued Resolution 1917,  approving the amendments to Section 282 of the Manual of Regulations for Banks on rediscount or lending rates as well as liquidated damages.

Under the resolution, the central bank agreed to adopt a flexible term premium in lieu of the fixed term premium in order to arrive at the appropriate rediscount rate.

“Under this policy, the BSP will have the flexibility to recalibrate the rates in response to changes in monetary management and/or economic conditions,” the central bank said.

The amendment is part of the broader reforms of the BSP to bring its policies in line with its lender of last resort function and to ensure that the rediscounting policies remain relevant to the present and future demands on monetary management.

The peso rediscount rates remain to be based on the BSP overnight lending rate plus a spread depending on the term of the loan, while the rates for the exporters dollar and yen rediscount facility will continue to be based on the 90-day London Inter-Bank Offered Rate (LIBOR) plus the spread depending on the term of the loan.

BSP MONETARY BOARD
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