Banks maintain P320.80 B rediscount lines with BSP

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said there are 50 banks, of which 17 are large, which have an active rediscount line worth P320.80 billion with the central bank of September this year.

These banks continue to use the BSP rediscount service as a temporary relief measure and for liquidity requirements.

From January to October, rediscount loan releases did not move to P26.90 billion and the 17 large banks accounted for P25.92 billion of this amount. However, compared to the same time in 2019, availabilities were down 77 percent from P118.67 billion.

“This may be due to the high liquidity position of the banks combined with the slowdown in bank lending as a result of weaker business activity,” Diokno said during his regular talk with the press. “Nonetheless, banks recognize BSP’s rediscount facilities as a financing option.”

The 50 banks that maintain rediscount lines with BSP do so as part of their contingency financing plan, he said. In addition to the 17 universal and commercial banks, there are also nine savings banks and 24 rural and cooperative banks with rediscount lines.

The rediscount service, which used to have a revolving budget, is now in an established “open regime”.

“In the midst of the pandemic, BSP implemented temporary relief measures at its rediscount facilities. These measures are in effect until the end of January 2021 ”, said Diokno. Temporary relief measures related to the rediscount of availabilities guarantee the availability of credit for productive economic sectors. They did this by lowering effective loan rates to encourage banks to make loans to businesses affected by the COVID-19 pandemic.

Temporary measures include: reducing the term margin of rediscount loans under the Peso Rediscount Service and the BSP Exporters Dollar and Yen Rediscount Service; acceptance for the rediscount of credit instruments denominated in US dollars and yen for economic activities listed in Circular Memorandum No. 20-08 of the Department of Commerce and Industry, except for loans to banks and capital markets. These economic activities are the manufacture and processing of basic food products, drugs and medical supplies; retail establishments such as groceries, supermarkets and pharmacies; logistics services; and outsourcing of business and export processes, among others.

The BSP also temporarily accepts for rediscount loans from credit instruments that were granted a one-time grace period of 60 days or more, under the “Bayanihan to Recover as One Act”.

Qualified banks can take advantage of the BSP rediscount line of credit for temporary liquidity requirements by refinancing the loans they make to their clients using the eligible documents of their end-user borrowers. Accepted eligible credit documents or instruments are classified as trade credits, production credits, and other credits.

“Rediscount is a privilege of qualified banks that have approved and active lines with the BSP to obtain loans or advances,” Diokno said. He said discounting “influences the volume of credit in the financial system (and) provides liquidity to individual banks and the banking system in the event that liquidity can no longer be obtained from market sources.”