LENDERS did not tap the central bank’s rediscount facility in October amid sustained liquidity in the financial system.

“There is no availment under the peso rediscount facility in the month of October,” the Bangko Sentral ng Pilipinas (BSP) said in a statement on Tuesday.

Banks did not tap the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) in the previous month as well.

For the year thus far, peso rediscount loans totaled P26.9 billion, a 78% decline from the P122.167 billion logged in the same period in 2019.

Banks only tapped the BSP facility in March, April, August and September this year.

Lenders’ decision to leave the rediscount window untapped shows increased liquidity in the financial system, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

“Larger bids were made by banks on the BSP’s TDF (term deposit facility) and 28-day securities auctions,” Mr. Ricafort said in a text message.

The term deposit facility was oversubscribed last week as demand reached P552.97 billion against the P490 billion on the auction block.

Meanwhile, bids for the BSP’s one-month bills totaled P121.725 billion on Friday, more than double the P60-billion offering.

The central bank’s rediscount window gives banks access to additional money supply by posting their collectibles from clients as collateral.

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

This November, the peso loan rate regardless of maturity is at 2.75%.

On the other hand, rediscount loans under the EDYRF will be priced at 2.21575% and 1.89733% respectively.

The term spread on peso rediscount loans has been reduced to zero. This is part of the BSP’s regulatory relief measures for banks amid the coronavirus crisis and is effective until January 2021.

For loans under the EDYRF, the applicable rate 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