Rediscounting loan availments plunge 88.3% in January-February

MANILA, Philippines - Total rediscounting loan availments by banking institutions plunged 88.3 percent in the first two months of the year after the Bangko Sentral ng Pilipinas (BSP) lifted crisis-related measures to siphon off excess liquidity in the financial system in light of the stronger-than-expected economic recovery last year.

Data released by the BSP over the weekend showed that the total availments under the BSP’s peso resdiscount facility reached P4.05 billion from January to February this year, or P30.4 billion lower than the P34.45 billion in the same period last year.

Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary liquidity needs by refinancing the loans they extend to their clients.

The bulk, or P4.04 billion, of the total rediscounting loans in the first two months of the year went to commercial credits while nine percent went to agriculture and industrial clients.

About six percent went to capital expenditures, 4.8 percent to other services, 3.5 percent to permanent working capital, 1.9 percent to housing, and 0.1 percent to microfinance.

Under the exporters’ dollar and yen rediscounting facility, aggregate availments under the US dollar facility retreated by 5.5 percent to $25.6 million in the first two months of the year from $27.1 million in the same period last year.

The facility offered by four commercial banks benefitted around 11 exporters.

The BSP said there was no availment under the yen facility during the period.

Monetary authorities use rediscounting loans as a monetary tool to regulate liquidity.

As early as January last year, the BSP’s Monetary Board has lifted several liquidity-enhancing measures introduced starting November of 2008 in light of the strong economic recovery. In all the BSP raised the rate on a short-term lending facility to four percent from 3.5 percent and reduced the peso rediscounting budget from P60 billion to P40 billion and further to P20 billion.

The central bank also restored the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument and at the same time revived 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.

The BSP has decided to keep its key policy rates at record lows due to benign inflation outlook. The BSP slashed its key policy rates by 200 basis points between December of 2008 to July of 2009 bringing the overnight borrowing rate at a record low of four percent and the overnight lending rate at six percent.

The BSP has pegged its Peso rediscount rate at four percent per annum under its Peso Rediscount facility for all maturities effective Feb. 1 last year. It has also pegged the rates for the month of March at 0.26100 percent per annum under the EDYRF and 0.13250 percent per annum for its Yen facility.

Last year, total rediscounting loan availments by banking institutions plunged 88.3 percent to P49.76 billion from P182.46 billion in 2009.