Banks borrow P6.9 billion from BSP’s rediscount facility

MANILA, Philippines — Banks borrowed P6.86 billion from the peso rediscounting loan facility of the Bangko Sentral ng Pilipinas (BSP) last month to meet their temporary liquidity needs amid the coronavirus disease 2019 or COVID-19 outbreak.

More banks tapped the facility after 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 BSP now charges a flat interest rate of 3.75 percent for loans under the peso rediscount facility, regardless of loan maturity.

Prior to the removal of the spread on peso rediscounting loans, there were no availments in the first two months.

Of the total amount borrowed in March, the central bank said loans for permanent working capital cornered the biggest share of 41.85 percent, followed by loans for capital asset expenditures with 32.23 percent.

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.

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

On the other hand, the BSP said there were no loan availments under the exporters dollar, while the yen rediscount facilities were reduced.

The rate for the dollar loans stood at 3.88 percent for 90 days, 4.31 percent for 180 days, and 5.17 percent for 360 days.

On the other hand, the rate for yen loans was pegged at 2.37 percent for 90 days, 2.81 percent for 180 days, and 3.67 percent for 360 days.

Meanwhile, BSP Governor Benjamin Diokno said the Monetary Board approved additional eligible credit instruments as well as the revised loan documents and availment procedures for the rediscount facilities.

Diokno said in Memorandum 2020 – 024, the additional eligible credit instruments and relaxed procedures are part of the additional response of the BSP in providing the needed liquidity to banks.

He said these would also protect the enterprises and industries amid the economic threat of the coronavirus pandemic pursuant to the provisions of Republic Act 11469 or the Bayanihan to Heal as One Act.

The BSP chief said peso-denominated credit instruments related to economic activities allowed to operate by the Department of Trade and Industry (DTI) during the enhanced community quarantine in Luzon, except for loans to banks and capital markets, are allowed to be rediscounted under the peso rediscount facility as long as they are compliant with the requirements on eligible papers and collaterals.

Diokno said bolder moves such as deeper rate cuts and further reduction of the reserve requirement for banks are needed in order for the Philippine economy to have a soft landing.

The BSP has slashed interest rates by 150 basis points since May last year, including 75 basis points for this year, almost reversing the tightening episode that saw rates rise by 175 basis points in 2018 due to inflation breach.

Diokno has been authorized to reduce the level of deposits banks are required to keep with the central bank by as much as 400 basis points this year, of which 200 basis points took effect last March 30 freeing up P200 billion into the financial system.