Cash-rich banks snub BSP’s rediscount facility

MANILA, Philippines — Awash with cash, banks continued to snub the peso rediscounting loan facility of the Bangko Sentral ng Pilipinas (BSP) for the fourth straight month in August as measures aimed at softening the blow of the COVID-19 pandemic released much needed liquidity into the financial system.

According to the BSP, banks borrowed P20.7 billion under the peso rediscount facility in March and April to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.

Of the total amount borrowed, the BSP said loans for capital asset expenditures cornered the biggest share of 62.7 percent, followed by permanent working capital with 13.9 percent.

The BSP said commercial credits accounted for 23.5 percent of the total rediscounting loans.

However, there were no takers since May even if 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.

The validity of the relief measure was extended twice to July 17 and to Sept. 30.

The applicable BSP rediscount rate for loans under the peso rediscount facility remains at 2.75 percent, regardless of loan maturity.

The peso rediscount rates are usually based on the latest BSP overnight lending rate plus a spread depending on the term of the loan.

Likewise, the BSP said there were also no takers for the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) despite the temporary reduction on the spread to zero until Sept. 30.

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.

Cash-rich banks continued to park their funds in BSP facilities such as term deposits and overnight reverse repurchase instead of lending more as credit growth slowed for the fourth straight month to 6.7 percent in July, the lowest in more than a decade.