BSP extends zero spread on rediscount loans until July

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended anew the zero spread on its peso rediscount loans by another three months to allow banks to tap the facility to meet their temporary liquidity needs.

BSP Governor Benjamin Diokno said the Monetary Board approved the extension of the temporary measures in the rediscounting facilities until July 31 through a resolution issued on April 29.

The BSP first approved the temporary reduction in the spread on peso rediscounting loans to zero initially from March 20 to May 19, 2020 after Luzon was placed under enhanced community quarantine.

It was extended to July 17 and Sept. 30 last year and to Jan. 31 and April 30 this year as part of measures aimed at providing banks the needed liquidity to maintain price and financial stability amid the pandemic.

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 their end-user borrowers.

Likewise, the reduction of the term spread on rediscounting loans under the Exporters’ Dollar and Yen rediscount facility (EDYRF) to the 90-day London interbank offered rate plus 200 basis points, regardless of maturity was also extended to July 31.

Diokno, however, said the BSP is no longer accepting credit instruments that were granted one-time 60-day grace period under the Bayanihan to Recover as One Act for rediscounting since April 30.

The peso rediscounting loans extended by the BSP plunged by 78 percent to P26.9 billion last year from a record P122.7 billion in 2019 amid the massive liquidity released by the central bank in the financial system to cushion the impact of the global health crisis.