No takers yet for BSP’s rediscount loan facility

MANILA, Philippines — Five months into the year, banks have yet to tap the peso rediscounting loan facility of the Bangko Sentral ng Pilipinas (BSP) amid the massive liquidity unleashed in the financial system to counter the impact of the COVID-19 pandemic.

As the industry remained risk-averse due to uncertainties brought about by the global health crisis, bank lending continued to contract as the pandemic affected the ability of borrowers to pay their loans.

Likewise, banks have yet to tap the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) of the central bank.

“There are no availments under the peso rediscount facility and EDYRF covering the period January to May 31 this year,” the BSP said.

The last time banks tapped the facility was in September last year as the National Capital Region and four nearby provinces (NCR Plus) reverted to modified enhanced community quarantine for two weeks in August amid the sharp rise in COVID-19 cases.

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 end-user borrowers.

The applicable rediscount rate for the month of June on loans under the peso rediscount facility remains at 2.50 percent, regardless of maturity, and 2.13138 percent for dollar and 1.90817 percent for Japanese yen loans under the EDYRF, regardless of maturity.

The BSP traced the decline in rediscounting availments to banks’ high liquidity position coupled with the deceleration of bank lending due to weaker corporate sector performance amid the uncertainties due to the pandemic.

Despite the decline, banks continue to recognize the BSP’s rediscount facilities as a funding option should liquidity no longer be sourced from the market. About 50 banks maintain rediscounting lines with the BSP as part of their contingency funding plan.

Preliminary data from the central bank showed loans disbursed by big banks shrank for the fourth straight month, contracting by 4.5 percent in March from 2.7 percent in February. This was the steepest slump since the 4.6 percent decline in May 2004.

The BSP’s COVID-19 response measures, including the 200-basis-point cuts in interest rates, the lowering of the reserve requirement, the P300-billion repurchase agreement with the Bureau of the Treasury, the P540-billion provisional advance to the national government, among others, unleashed P2 trillion into the financial system.

The central bank wants to make sure there is available credit to productive economic sectors by lowering effective lending rates and to encourage banks to lend to businesses to help them recover from the COVID-19 crisis.

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 due to the lack of takers.