Banks borrow from rediscount facility in July

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BANKS revisited the central bank’s rediscount facility in July after it was left untouched for two months, which came alongside adjustments to the borrowing rates.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said banks availed of peso rediscount loans amounting to P12 million last month, adding to the P15 million secured in April.

Local banks may turn to the BSP’s rediscount window in order to meet their short-term funding needs. Under the facility, lenders can submit promissory notes from outstanding client debts as collateral to acquire fresh money supply, which they can use to hand out more loans or service withdrawals.

For the first seven months, banks got hold of P27 million from the peso rediscount facility, with 54.7% channelled to housing credits and permanent working capital. On the other hand, those used for commercial lending went up to 44.5%, while a 0.8% share was extended to production.

The availments came as new borrowing rates took effect on July 21 after the central bank closed the special window for thrift, rural, and cooperative banks which was in place since 2013.

The BSP took away the preferential rates imposed on the small lenders due to low availments, with Deputy Governor Diwa C. Guinigundo saying that these banks do not need the facility in order to remain liquid.

With the adjustment, rediscount loans secured by the small banks will be charged the same as those incurred by bigger lenders at 3.5625% for loans maturing in 90 days and 3.625% for 180-day credit lines.

Meanwhile, the dollar and yen rediscount windows remained untouched as of end-July.

Interest rates under the foreign currency windows saw mixed movements for August, with dollar yields tracking the rise in benchmark rates in the United States.

Yields for dollar loans rose to 3.31056% for 90-day loans; 3.37306% for 91- to 180-day loans; and 3.43556% for 181- to 360-day loans. This comes as the US Federal Reserve raised policy rates by another 25 basis points during last month’s review.

On the other hand, yen-denominated loans will fetch lower rates at 1.98421% for one to 90-day loans, 2.04671% for 91- to 180-day loans, and 2.10921% for 181- to 360-day loans.

Central bank officials have said that the Philippine financial system remains awash with cash, with banks holding on to more idle funds despite strong credit growth. — Melissa Luz T. Lopez