BSP’s rediscount facility left untapped in May

LENDERS LEFT the central bank’s rediscount facility untouched in May, signaling liquidity levels have increased after the implementation of measures meant to funnel more funds into the financial system.

“There was no availment under the BSP (Bangko Sentral ng Pilipinas) Rediscount Facilities for the month ending May 31,” the central bank said in a statement on Wednesday.

The rediscount facility of the BSP lets banks get hold of additional money supply by posting their collectibles from clients as collateral.

In turn, the banks may use the cash — in peso, dollar or yen — to disburse more credit for corporate or retail clients and service unexpected withdrawals.

From March to April, peso rediscount borrowings totaled P20.7 billion. This compares to the P85.799 billion loan availments from January to May 2019.

Lenders also left the rediscount facility untapped from November 2019 to February 2020.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said banks’ decision not to tap the rediscount facility in May reflects “increased peso liquidity” after the reduction in reserve requirement ratio for banks as well as other regulatory relief measures that encourage lenders to disburse more credit.

“This sends a positive signal to the markets, as banks need not rediscount their loans with the BSP and indicate they have more than enough funding to service the requirements of their depositing and borrowing clients,” he said in an e-mail.

Mr. Ricafort said the continued increase in liquidity due to easing measures from the central bank will reduce banks’ need to tap the rediscounting facility for extra funding.

The reserve requirement of universal and commercial banks was reduced by 200 basis points to 12% effective in April in a move to boost liquidity during the Luzon lockdown. This move infused some P200 billion into the banking system, Mr. Ricafort said.

Aside from this, the BSP has also allowed banks’ lending to micro-, small-, and medium-sized enterprises and to large enterprises hit by the pandemic to count as alternative reserve compliance.

JUNE RATES
Meanwhile, applicable rates for peso loans regardless of maturity is at 3.25% this month, which is the current lending rate of the central bank. The rate was approved by the Monetary Board in May and is effective until July 17.

Meanwhile, dollar-denominated loans are priced at 2.776% for those maturing in three months or less; 3.208% for those maturing in 91 days to 180 days; and 4.072% for those with a term of 181.36%.

For yen-denominated loans, rates are at 2.39117% for those with terms of three months or less; 2.82317% for those maturing within a 91-180 day time frame; and 3.68717% for loans maturing from 181 to 360 days.

The Exporters’ Dollar and Yen Rediscount Facility rates are based on the 90-day London Inter-Bank Offered Rate plus a spread depending on the term of the loan. — Luz Wendy T. Noble