LENDERS DID NOT avail of the central bank’s rediscount facility for the fourth straight month in February, as banks had enough liquidity following the reserve requirement ratio (RRR) cuts implemented last year.
“There were no availments under the Peso Rediscount Facility and the EDYRF (Exporters Dollar and Yen Rediscount Facility) for the period covering Jan. 1 to Feb. 29,” the Bangko Sentral ng Pilipinas said in a statement on Monday.
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 fresh cash — in peso, dollar or yen — to grant more loans for corporate or retail clients and service unexpected withdrawals.
Peso rediscount loans are based on the overnight lending rate which is currently at 4.25% to be added to a spread depending on the term of the loan.
Peso loans totaled P122.167 billion from January to October 2019. After which, banks did not tap the facility.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said lenders may have opted to not avail rediscount loans due to the excess liquidity from the series of RRR cuts in 2019.
“Banks may not have availed yet the Peso Rediscounting Facility at the BSP brought about by the cut in banks’ RRR that effectively infused additional funds into the banking system by a total of more than P450 billion,” he said in an e-mailed response.
He added that prospects of a global economic slowdown due to US-China trade war and concerns on the spread of the coronavirus disease 2019 may have also affected demand for financing.
“Some banks could possibly tap again the Peso Rediscounting Facility in the next few months, as early as Q2 2020, in view of planned borrowings by the biggest businesses and by the government as borrowing costs recently eased that made it more attractive for borrowers,” Mr. Ricafort said.
The BSP trimmed banks’ RRR by a total of 400 basis points last year, reducing the reserve requirement ratios of big banks, thrift and rural lenders to 14%, four percent, and three percent, respectively.
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno has said he wants to reduce big banks’ RRR to the single-digit level by the end of his term in mid-2023.
For this month, rediscount rates for peso loans with a maturity of 90 days or less are priced at 5.19% while those with a 91- to 180-day term have a rate of 6.143%.
On the other hand, the EDYRF for the dollar credit lines will have rates of 4.40925% for loans maturing from one to 90 days; 5.35575% for those with a tenor within a 91- to 180-day time frame; and 7.24875% for those with a term of 181 to 360 days.
For yen-denominated credits, rates are at 2.86% for terms of three months or less; 3.817% for those maturing within a 91-180 day time frame; and 5.71% for loans maturing from 181 to 360 days.
Computations for the EDYRF rates are depending on the 90-day London Inter-Bank Offered Rate plus the spread depending on the tenor of the credits, the BSP said. — Luz Wendy T. Noble