BSP rediscounts P87.7 billion worth of loans in first half

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said rediscounting loans for the first six months of the year amounted to P87.688 billion of which 61.8 percent went to commercial credits, three percent to agricultural and industrial credits, and 35.2 percent to other credits.

These other credits consisted of other services (16.1 percent), CAPEX (11.7 percent), permanent working capital (6.7 percent), housing (0.7 percent) and microfinance (less than 0.1 percent).

On the other hand, the BSP said that since the start of the Export Dollar Facility in 1995, aggregate availments of 29 commercial banks amounted to $2.224 billion, benefiting 571 exporters.

For the month of June 2009, dollar availments totaled $4 million.

On the other hand, four commercial banks had total availments of ¥1.995 billion under the Yen facility since its opening in June 1999. There was no yen availment for the month of June 2009.

The BSP said, however, that it would not increase its rediscounting budget unless there was dire demand for it but Deputy Governor Diwa Guinigundo told reporters that the central bank was not ruling out the possibility of another increase in the rediscounting budget.

The rediscount facility of the BSP is a loan facility that banks could tap for their liquidity requirements provided they had the collateral and they met the qualifications set by the BSP.

According to Guinigundo, however, the BSP also wanted to ensure that the amount released into the system would not cause an uptick in money supply such that it would create inflationary pressures.

“We will have to ensure the resulting level is consistent with our inflation targets,” Guinigundo said.

The BSP last increased its rediscounting budget in February from P40 billion to P60 billion as part of its monetary policy easing and it also allowed easier access to the facility by loosening up some of the qualifying criteria.

The BSP also capped the access of large commercial banks to the rediscounting facility, allowing smaller banks better access to limited rediscounting funds by preventing large banks from cornering the available funds.

The latest available data from the BSP indicated that over P40 billion of the facility has already been used up, indicating that there might be a need to increase the budget further.

The BSP also liberalized the rediscount facility to allow easier access by banks that need liquidity and also by preventing large commercial banks from cornering the available funds.

In a circular effective March 2, the BSP increased the allowable non-performing loans (NPL) holdings of banks that want to access the rediscount facility.

Guinigundo explained that under the old rules, the hurdle was set at two percentage points over the current industry average NPL ratio. “For example, the current industry ratio is four percent, so if a bank has an NPL ratio of over six percent, then it will not qualify for a rediscount loan,” Guinigundo explained.

In the new circular, Guinigundo said the BSP decided to increase the add-on from two percentage points to 10 percentage points so that if the industry average was four percent, banks with NPL ratio of 14 percent would still qualify for rediscount loans.