Rediscount facility left untouched in January on strong market liquidity

BANKS did not tap the central bank’s rediscount facility last month as liquidity in the financial system remained ample.

“There are no availments under the Peso Rediscount Facility and the EDYRF (Exporters’ Dollar and Yen Rediscount Facility) for the period covering Jan. 1 to 31,” the Bangko Sentral ng Pilipinas said in a statement.

Lenders likewise left the facility untouched in the same month in 2020. The rediscount window only saw availments in March, April, August and September last year, with cumulative loans dropping by 77.7% to P26.9 billion from the 2019 level.

On the other hand, the EDYRF was not utilized at all in 2020.

The BSP’s rediscount facility gives banks access to additional liquidity by letting them post collectibles from clients as collateral. In turn, lenders can use the cash, which could be in peso, dollar, or yen, to lend more to their corporate or retail clients and service unexpected withdrawals.

Banks’ decision to not avail of rediscount loans shows their liquidity levels remain ample, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“Excess liquidity in the financial system continued to go up, coupled by the slight year-on-year decline in bank loans, thereby fundamentally reducing the need for banks to tap the BSP rediscounting facilities,” Mr. Ricafort said in a text message.

Outstanding loans by big banks declined for the first time in nearly 14 years by 0.7% in December, based on latest BSP data, after bank lending growth already dropped to the single-digit level in the preceding months.

“For the coming months, the propensity/tendency for some banks to tap the BSP rediscounting facilities would be correlated or a function of the pickup/recovery in loan demand and in the overall economy,” Mr. Ricafort said.

Memorandum No. M-2021-012 signed by BSP Governor Benjamin E. Diokno again extended the central bank’s relief measure that made the rediscount rate equal to the overnight lending rate, regardless of the tenor until April 30. Prior to this, Memorandum M-2020-076 issued in September last year allowed this relief measure to be in place until Jan. 31, 2021.

The recently issued memorandum will likewise reduce the term spread for applicable rates to loans under the EDYRF. This means rates for credits to be disbursed in the facility will have the 90-day London Interbank Offered Rate or in its absence, an applicable benchmark rate such as the Secured Overnight Financing Rate, plus 200 basis points, regardless of maturity.

For February, peso rediscount loans will be priced at 2.5%, which is also the current lending rate, regardless of maturity.

On the other hand, applicable rates for dollar and yen-denominated loans regardless of tenors are at 2.20188% and 1.9055%, respectively. — Luz Wendy T. Noble

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