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BSP sees drop in peso rediscount facility availment

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BSP

By Melissa Luz T. Lopez
Senior Reporter

BANKS KEPT availing of rediscount loans from the Bangko Sentral ng Pilipinas (BSP) in March, which went to support commercial lending and for capital spending.

The BSP said in a report that players secured P1.226 billion worth of credit under its peso rediscount window last month, marking the second straight month of availments under the facility. This was lower than the P5.81 billion that banks took out in February.

No rediscount borrowings were made in March 2017, BSP data showed.

As a rule, banks may tap the BSP’s rediscount window in order to meet short-term funding should their usual money supply fail to meet client demand for cash. In turn, credit lines extended under the facility illustrate the central bank’s mandate as lender of last resort for financial firms.

The rediscount window allows banks submit promissory notes from outstanding debts as collateral to acquire fresh money supply. The cash — which may come in peso, dollar or yen — can then be used to grant more loans or service withdrawals.

Total rediscount borrowings reached P7.036 billion during the first quarter. Around 56% of the borrowings were extended for capital asset expenditures while 37.9% was given as commercial credit.

Other loans went to support permanent working capital, services, housing, and production credits, the BSP said in a statement.

All rediscount loans are charged a uniform rate after the BSP shut down the special window for thrift, rural and cooperative banks in July last year. Low rediscount volumes from small lenders prompted the BSP to remove the preferential rates, with the view that these players do not depend on the facility in order to remain liquid.

Two rates are imposed for short-term peso borrowings secured by banks. Loans maturing in 90 days are charged a 3.5625% rate, while 180-day credit lines carry a 3.625% spread. These are computed based on the BSP’s overnight lending rate at 3.5%, plus term premia.

Meanwhile, the dollar and yen rediscount window for exporters remained untouched during the quarter, sustaining a trend seen over the past year.

Rates for the foreign currency rediscount window picked up anew this April.

Yields on dollar loans rose further to 4.31175% for 90-day loans; 4.37425% for 91- to 180-day loans; and 4.43675% for 181- to 360-day loans. This mirrored an uptick in global interest rates following a fresh rate hike introduced in the United States last March.

Margins for yen-denominated borrowings likewise inched higher to 1.96867% for one to 90-day loans, 2.03117% for 91- to 180-day loans, and 2.09367% for 181- to 360-day loans.

BSP has said that there remains abundant liquidity in the financial system, leaving local lenders with enough cash to service day-to-day transactions.

March also saw additional liquidity infused into the local financial system after the BSP reduced the reserve requirement ratio imposed on big banks to 19%. The move likely freed up P90 billion to the economy, which the central bank expects to be channelled to increased lending activities and in placements under the term deposit facility.