BSP extends zero-rate rediscounting for last time

The Bangko Sentral ng Pilipinas (BSP) will still apply its reduced term spread on its rediscounting facility until June 30 this year but this will be the final extension, according to BSP Governor Benjamin E. Diokno.

In a memo (BSP Memorandum No. M-2022-021) which Diokno signed last March 31, he said that since there are no takers for rediscounting loans from the BSP, they are assuming that banks “have more than adequate liquidity to meet their requirements”.

BSP Governor Benjamin E. Diokno

Diokno said that “given the improving domestic liquidity and credit conditions, the temporary measure on the acceptance for rediscounting with the BSP” was only up to March 31 but they will still extend until end-June unlike in previous extensions that lasted six months every time.

This is the eight time that the temporary relief measure has been extended by the BSP’s Monetary Board.

“As the BSP begins to observe indications of a durable economic recovery, we continue to carefully develop our plans for the eventual withdrawal of the extraordinary liquidity measures we deployed in response to the pandemic. The BSP will ensure that its policy instruments remain appropriately calibrated to ensure sustainable and non-inflationary economic growth, in keeping with our price and financial stability mandates,” said Diokno in the memo.

As such, the reduction of the term spread on peso rediscounting loans to zero, which makes it the same rate as the BSP’s overnight lending rate regardless of maturity, one day to 180 days, will still be implemented until June 30.

The reduction of the term spread on rediscounting loans under the Exporters’ Dollar and Yen Rediscount Facility or EDYRF which makes it applicable to benchmark rate plus risk premium, regardless of maturily of one day to 360 days, is also extended for the last time.

Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.

The rediscounting loans are classified by type of underlying credit such as commercial, production or other credits based on the eligible papers offered by banks as collateral.

As of January this year, the BSP continued to report zero rediscounted loans.

At the end of 2021, only 12 big banks, seven thrift banks and 18 rural/cooperative banks have approved rediscounting lines with the BSP amounting to P316.507 billion.

Last year, the BSP released only P6.12 million under the peso rediscounting facility. There were no takers of the EDYRF since 2016.

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