BSP’s rediscounted loans totaled P15.3 B in October.

Bangko Sentral ng Pilipinas (BSP)’s Peso Rediscount Facility released a total of P15.3 billion of loans at the end of October. This is significantly higher than just P6.12 million in the same period last year.

The BSP did not say how many banks took out P3.7 billion of rediscounted loans in October, or if it was just one. This was the first time the facility had moved since May of this year. Loans available remained at P11.6 billion for four months.

Money/File (Manila Bulletin article)

There was still no utilization under the Exporters’ Dollar Yen Rediscount Scheme (EDYRF) during the same period, according to the BSP on Monday 7 November. The last time a bank borrowed from his EDYRF was in 2017.

A rediscount, as defined in the BSP, is a line of credit for eligible banks that have a valid rediscount facility with the BSP. Banks utilize the facility to meet temporary liquidity needs by using the end-user borrower’s eligible documents to refinance the loans they provide to their customers.

These eligible documents are credit products such as promissory notes, drafts and bills of exchange. These include commercial credits, production credits, and “other” credits or special credit products.

At the beginning of 2022, there were 9 major or universal and commercial banks, 7 savings banks and 21 rural/cooperative banks with a total rediscount line of P227 billion in BSP.

Peso rediscount rates are based on the latest available BSP Overnight Lending Rates plus spreads, while EDYRF rates are based on the 90-day London Interbank Offer Rates as of 31 October 2022 plus the spread.

As of October 31, the peso rediscount rate for 1 to 90 days is 5.6701% and for 91 to 180 days is 6.5902%.

Amid the pandemic, the BSP rolled out temporary relief to its rediscount facility to ensure access to credit for productive economic sectors. They did this by lowering the effective lending rate to encourage banks to lend to businesses hit by the Covid-19 health crisis.

Temporary measures include: Acceptance of rediscounts of US dollar denominated and yen denominated credit products for economic activities as described in Ministry of International Trade and Industry memorandum circular No. 20-08 (excluding lending to banks and capital markets).

These economic activities are the manufacturing and processing of basic food, pharmaceutical and medical supplies. Retail stores such as grocery stores, supermarkets, and drug stores. logistics services; export and business process outsourcing, among others;

BSP has also temporarily accepted rediscounting of credit product loans granted a one-time grace period of 60 days or more under the Bayanihan to Recover as One Act.

Essentially, rediscounting is the prerogative of eligible banks with BSPs and approved and active lines to obtain loans or prepayments.

According to the BSP, the rediscounting regime also affects the amount of credit in the financial system, providing liquidity to individual banks and the banking system when liquidity is no longer available from the market.

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