Rediscounting availments down 50%

MANILA, Philippines - Rediscounting loan availments by banking institutions plunged by more than 50 percent in the first half of the year after monetary authorities raised the rate on a short-term lending facility to kick off the unwinding of its accommodative policy stance through the phase out of liquidity enhancing measures.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that total availments under the BSP’s Peso Resdiscount facility reached P43.3 billion from January to June this year or P44.37 billion lower than the P87.67-billion total in the same period last year.

Nearly 55 percent of the total rediscounting loans availed of by commercial, thrift, and rural banks went to commercial credits while 27.7 percent went to other services, 8.9 percent to capital expenditures, 2.8 percent to permanent working capital, and 1.6 percent to housing.

A little over four percent went to agricultural and industrial credits.

Aggregate availments under the Export US dollar facility amounted to $54.3 million from January to June, benefitting 23 exporters. There was no availment under the Export Yen Facility during the period.

The BSP said availments under the Peso Rediscount Facility excluded the P9 million rediscounting loans granted to micro, small and medium enterprises (MSMEs) affected by tropical storm Ondoy and typhoon Pepeng last year.

The BSP’s Monetary Board had approved the establishment of an additional P5.0 billion budget for rediscounting to cover for typhoon-affected MSMEs. The amount was on top of the rediscounting budget of P60 billion.

However, the P5 billion budget previously earmarked to assist bank customers adversely affected by tropical storm Ondoy and typhoon Pepeng last year has been rechanelled to help clients affected by the El Niño weather conditions.

The BSP has pegged its peso rediscount rate at four percent per annum under its Peso Rediscount facility for all maturities effective Feb. 1. It has also pegged the rates for the month of July at 0.34844 percent per annum under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) and 0.15813 percent per annum for its Yen facility.

The central bank has slashed key policy rates by 200 basis points from December 2008 to July last year as part of easing measures to boost the country’s slackening domestic economy. This brought the overnight borrowing rate to a record low of four percent from six percent and the overnight lending rate to six percent from eight percent.

The BSP’s Monetary Board decided to keep its key policy rates unchanged for eight consecutive policy-setting meetings but paused the implementation of an exit strategy in light of the debt crisis in Europe, the growing concerns between North and South Korea as well as the stronger-than-expected gross domestic product (GDP) growth of 7.3 percent in the first quarter of the year.

The BSP lifted several liquidity-enhancing measures introduced starting November of 2008 to cushion the impact of the global financial meltdown.

Apart from the increase in the rate on a short-term lending facility to four percent from 3.5 percent, other measures that were tweaked included the reduction of the peso rediscounting budget from P60 billion to P40 billion and further to P20 billion; the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument; and the revival of the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points above the latest available industry average NPL for banks wishing to avail of the rediscounting facility.