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Rediscount rates down following BSP cut

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REDISCOUNT RATES have been lowered following the latest rate cut from the Bangko Sentral ng Pilipinas (BSP) and as part of the central bank’s additional regulatory relief for financial institutions due to disruptions caused by the coronavirus disease 2019 (COVID-19) outbreak.

On the other hand, applicable rates for the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) have been maintained.

“As such, the applicable rediscount rate for loans under the Peso Rediscount Facility has been set at 3.75%, regardless of loan maturity,” the BSP said in a statement.

The Monetary Board has slashed key policy rates by 50 basis points (bp), bringing down down yields on the BSP’s overnight reverse repurchase, overnight lending and deposit facilities to 3.25%, 3.75%, and 2.75%, respectively.

Aside from this, BSP Governor Benjamin E. Diokno said they will give more regulatory relief to BSP-supervised financial institutions (BSFIs) to help them weather business disruptions due to the outbreak.

Among these measures is the temporary reduction in the term spread on rediscounting loans relative to the overnight lending rate to zero.

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

For its part, lenders may use the fresh cash — in peso, dollar or yen — to grant more loans for corporate or retail clients and service unexpected withdrawals.

Before the central bank’s announcement on the reduction of rates, applicable yields for rediscount loans in March were at 5.19% for peso loans with a tenor of 90 days or less, while credit with a 91- to 180-day maturity were given a rate of 6.143%.

Since November last year, the rediscount facility of the BSP has been untapped by lenders, with analysts saying banks still have enough liquidity after the reduction in banks’ reserve requirement ratio.

Before that, peso rediscount loans hit P122.167 billion from January to October 2019.

Sought for comment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the lower rates could attract banks to replenish their liquidity during the enhanced community quarantine.

“Lower interest rates could somewhat encourage banks to tap again the peso rediscounting facility, though banks have many other alternatives for peso funding sources available such as through commercial banking operations, investment banking activities, and other interbank sources,” Mr. Ricafort said in an email.

Moreover, the lower rates could help boost liquidity for banks “in an effort to spur greater demand for loans that help increase economic activities and GDP (gross domestic product) growth.”

On the other hand, the EDYRF will still be computed based on the 90-day London Inter-Bank Offered Rate plus the spread depending on the tenor of the credits, the BSP said.

The dollar loans will have rates of 4.40925% for credits 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, March 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. — L.W.T. Noble





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