BSP eases rules on rediscount loans for banks

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has relaxed the guidelines on the availments of rediscounting loans to help banks tap the facility to meet their temporary liquidity needs amid the coronavirus disease 2019 or COVID-19 pandemic.

BSP Governor Benjamin Diokno said the Monetary Board issued resolution 440.B on March 25 relaxing the regulations governing the submission of applications and availments for rediscounting lines.

The resolution also contains the new guidelines on the submission of reports or documents as well as communications to the BSP-Department of Loans and Credit (BSP-DLC).

“These guidelines are intended to ease the exchange of communications between the banks and BSP-DLC and to simplify the application and availment procedures in obtaining a rediscounting line from the BSP in order to allow banks to immediately and continuously deliver their financial services during this extraordinary situation,” Diokno said.

Under the simplified procedures, banks applying for rediscounting loans are required to submit via email to DLCmail@bsp.gov.ph the digital or scanned copies of the application form, secretary’s certificate or board resolution duly signed by board of directors, original certification that the bank has no past due obligations with all other financial and lending institutions dated at most one week prior to the filing of application, and certification signed by the president and chief compliance officer.

The approval and effectivity of the rediscounting lines would be relayed to the bank via email after which approved banks could freely access the electronic rediscounting system (eRS).

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 Monetary Board approved earlier the temporary reduction in the spread on peso rediscounting loans relative to the central bank’s overnight lending rate to zero for a period of 60 days or until May 19.

As such, the central bank would impose a flat interest rate of 3.75 percent for loans under the peso rediscount facility, regardless of loan maturity.

The central bank imposed a deeper cut of 50 basis points on benchmark rates last Thursday, bringing the overnight repurchase facility to 3.25 percent as well as the overnight deposit and overnight lending rates to 2.75 percent and 3.75 percent, respectively.

The BSP has slashed interest rates by 150 basis points since May last year, almost reversing the tightening episode that saw rates rise by 175 basis points in 2018 due to inflation breach.

Likewise, the rates for the loans under the exporters dollar and yen rediscount facilities were also reduced.

The rate for the dollar loans was also reduced to 4.40925 for 90 days, 5.35575 percent for 180 days, and 7.24875 percent for 360 days. On the other hand, the rate for yen loans was also slashed to 2.87050 percent for 90 days, 3.81700 percent for 180 days, and 5.71000 percent for 360 days.

So far this year, there has been no availments under the peso rediscount as well was exporters dollar and yen rediscount facilities.

Loans from the peso rediscount window of the central bank jumped 71 percent to a record high of P122.17 billion last year from P71.52 billion in 2018.

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