BORROWINGS from the BSP’s rediscount facility surged in August. — BW FILE PHOTO

BANKS SCRAMBLED to get hold of rediscount loans from the Bangko Sentral ng Pilipinas (BSP) in August to hit nearly P10 billion at a time of rising interest rates.
Peso rediscount loans reached P9.41 billion for the month, soaring from the P838 million availed by the lenders in July.
The spike in rediscount loans brought the eight-month tally to P20.024 billion, well above the P470 million incurred during the comparable period in 2017.
The BSP’s rediscount window allows banks get hold of additional money supply by posting their collectibles from clients as collateral. The banks may use the fresh cash — expressed in the peso, dollar or yen — to grant more loans for corporate or retail clients as well as service unexpected withdrawals.
Nearly half of the rediscount loans to support capital expenses, which accounted for 41.4% of the running total. Meanwhile, commercial lending also reached nearly 31% while credit for permanent working capital took up a fourth of the sum, the BSP said.
The rediscount facility likewise allows the BSP to fulfill its role as lender of last resort by arming banks with additional liquidity when they need it.
Banks expanded their rediscount loan lines in August, which came amid a series of tightening moves from the BSP. Benchmark rates were raised by another 50 basis points (bps) during the central bank’s Aug. 9 policy meeting, marking its strongest response in a decade as inflation continues to trend above target.
This follows two hikes worth 25 bps each in May and June, which was the BSP’s way of reining in inflation expectations as price pressures keep mounting. This brought benchmark yields to the 3.5-4.5% range.
Inflation has leaped to a fresh nine-year high of 6.4% in August, beating market expectations and surpassing the 2-4% target band.
As of Aug. 13, rates for peso rediscount borrowings stand at 4.5625% for loans up to 90-day loans and 4.625% for 91-180 day loans. This is based on the BSP’s overnight lending rate plus a premium.
On the other hand, the dollar and yen loan facilities remained unused in August, sustaining a trend observed last year. Loan margins also dropped from the previous month.
For September, rates for dollar borrowings slid to 4.32075% for one to 90-day loans; 4.38325% for 91- to 180-day loans; and 4.44575% for 181- to 360-day loans, the BSP said yesterday. Yields imposed on yen-denominated loans softened to 1.96767% for one to 90-day loans, 2.03017% for 91- to 180-day loans, and 2.09267% for 181- to 360-day loans.
Bank analysts said that the sustained price spikes merit another tightening move from the central bank this month, possibly by another 50 bps in order to temper future inflation. This, in turn, will push both rediscount and market interest rates higher. — Melissa Luz T. Lopez