BSP lifting cap on bank lending facility

Posted on October 16, 2013

THE BANGKO SENTRAL ng Pilipinas (BSP) will scrap the P20-billion ceiling on its peso rediscount facility next month, in effect allowing banks to borrow more funds to finance short-term liquidity needs.

“The BSP’s peso rediscounting window will turn into an open-volume facility effective Nov. 15 this year, meaning requests of banks to the facility will be granted regardless of amount subject to compliance with pre-determined eligibility requirements,” BSP Governor Amando M. Tetangco, Jr. told reporters via e-mail on Monday night.

In a text message on Monday, BSP Deputy Governor Diwa C. Guinigundo explained that the move will “remove the P20-billion budget that the central bank has set aside for the peso rediscounting facility‚Ķ for universal and commercial banks.”

The rediscount facility is a refinancing window from which banks borrow money using promissory notes and other loan papers of its borrowers as collateral, according to the central bank.

The central bank announced in August that it is restructuring the peso rediscounting facility to “align it further with the BSP’s market-based monetary operations framework and with international central banking practice of scaling down directed credit operations‚Ķ as it remains committed to providing the appropriate level of liquidity to the banking system to ensure sustained funding for the country’s growth requirements to the extent that the inflation outlook will allow.”

BSP also said that by next month there will be two separate rediscounting windows. Rediscounting Window I will be for universal and commercial banks, while Rediscounting Window II will be for thrift, cooperative and rural banks.

With the absence of a ceiling, Mr. Guinigundo said the amount banks can borrow from the facility will depend on their capital, assets, management, earnings, liquidity, and sensitivity (CAMELS) rating, which measures a bank’s financial health and ability to pay obligations.

“There is a scoring system based on the banks net worth and compliance with CAMELS rating,” he said.

Loan rates for universal and commercial banks are pegged at BSP’s lending rate of 5.5%, while that for thrift, rural and cooperative banks is set at BSP’s 3.5% borrowing rate. As of September, banks had availed of P17.32 billion in loans from BSP’s rediscount facility, lower than the P32.761 billion recorded in the same period last year. -- A. R. R. Gregorio