BSP extends zero spread on rediscounting loans

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended the zero spread on its peso rediscount loans until the end of the year to allow banks to tap the facility to meet their temporary liquidity needs amid the  pandemic.

BSP Governor Benjamin Diokno said the Monetary Board approved the  extension of the temporary measure in the rediscounting facilities until end-2021 through Resolution 976 issued on July 29.

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

The reduction was extended to July 17 and Sept. 30 last year and to Jan. 31, April 30, and July 31 this year as part of measures aimed at providing the needed liquidity to banks for purposes of maintaining price and financial stability amidst the global health crisis.

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.

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 Dec. 31, 2021.

Banks continued to snub the rediscounting loan facilities of the central bank in the first half with only one bank availing P4 million in June to finance industrial processing amid the massive P2.21 trillion additional liquidity released into the financial system by response measures last year to soften the impact of the   pandemic.

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.