REDISCOUNT loans climbed in September from a year ago as more firms tapped the facility amid the coronavirus pandemic. — BW FILE PHOTO

BANKS AVAILED of the central bank’s rediscount window for the second consecutive month in September, likely due to two weeks of a stricter lockdown in Metro Manila which may have caused a slowdown in business activity.

Peso rediscount loans hit P6.7 billion last month, more than triple the P2.1 billion in credit logged in September 2019, data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed.

However, peso rediscount loans disbursed in the first nine months of 2020 slumped by 341.17% to P26.9 billion from the P118.674 billion seen in the same period in 2019.

Meanwhile, there were no availments from the Exporters’ Dollar and Yen Rediscount Facility (EDYRF).

The central bank’s rediscount window lets lenders get hold of additional money supply by posting their collectibles from clients as collateral.

The cash — which is denominated in peso, dollar or yen — may be used by banks to disburse more loans for corporate or retail clients and to service unexpected withdrawals.

Borrowings from the peso rediscount facility in the first nine months of the year went to transactions related to commercial and other credits.

Other credits made up bulk or 81.94% of outstanding peso rediscount loans in the period, which were comprised of borrowings for capital expenditures (71.26%), permanent working capital (10.67%) and housing (0.01%).

Meanwhile, commercial credits, which made up 18.06% of loans in the period, were comprised of bank loans for importation (10.93%) and trading (7.13%) of goods.

Banks likely decided to tap the BSP’s rediscount window amid the impact of tighter quarantine measures imposed for two weeks in August, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in the text message.

“The latest increase in BSP rediscounting loans facility with banks may be partly brought about by the slowdown in business/economic activities largely brought about by the effects of the 2-week MECQ (modified enhanced community quarantine (MECQ) in Metro Manila and in nearby areas from Aug. 4 to 18,” Mr. Ricafort said.

Before August, lenders only tapped the peso rediscount facility this year back in March and April. Those months saw the tightest restrictions due to the coronavirus pandemic.

Meanwhile, for this month, the applicable rate for peso loans regardless of maturity is at 2.75%.

For the dollar and yen rediscount facilities, loans will be priced at 2.22038% and 1.90083%, respectively, regardless of maturity.

As part of its regulatory relief measures for banks amid the pandemic crisis, the BSP has extended the reduction of the term spread on peso rediscount loans to zero regardless of maturity until January 2021.

Meanwhile, the applicable rate for loans under the EDYRF will be the London Interbank Offered Rate or, in its absence, an applicable benchmark rate such as the secured overnight financing rate, plus 200 basis points, regardless of maturity. — L.W.T. Noble