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Rediscount facility untapped

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Facade of the Bangko Sentral ng Pilipinas along Roxas Boulevard, taken on December 5, 2014. -- BW FILE PHOTO

THE REDISCOUNT WINDOW offered by the Bangko Sentral ng Pilipinas (BSP) stood untapped in January amid ample money supply held by banks, just as yields for foreign currency borrowings continued their ascent.

Banks did not avail of rediscount loans from the central bank’s facility last month, coming from the P447 million they borrowed in December. No rediscount loans were also recorded in January 2017, BSP data showed.

As a practice, banks may borrow from the BSP’s rediscount window in order to meet short-term funding if their usual supply of cash falls short of client demand. This also allows the central bank to fulfill its duty as lender of last resort.

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

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. The central bank removed preferential rates imposed on small lenders due to low availments, with the monetary authority seeing that these players do not need to rely 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.

For February, rates for dollar loans rose further to 3.77777% for 90-day loans; 3.84027% for 91- to 180-day loans; and 3.90277% for 181- to 360-day loans. These track movements in global financial markets, following a fresh interest rate hike introduced in the United States back in December.

On the other hand, margins for yen-denominated borrowings slipped anew to 1.95933% for one to 90-day loans, 2.02183% for 91- to 180-day loans, and 2.08433% for 181- to 360-day loans.

The central bank’s rediscount window for foreign currencies still stood unused in January, as it had been throughout 2017. In particular, the facility for dollar-denominated debts has been untapped since June 2015.

Central bank officials have said that there remains abundant liquidity in the financial system, leaving local lenders with enough cash to service day-to-day transactions.

Domestic liquidity expanded by 11.9% in December, bringing total funds in the local economy to reach P10.6 trillion, according to latest available central bank data.  — Melissa Luz T. Lopez