Rediscounting loans down 68%

MANILA, Philippines - Total rediscounting loan availments by banking institutions fell 68.3 percent in the first seven months of the year as authorities continued to tighten its monetary policy stance to keep inflation expectations well anchored amid rising global oil prices and rising liquidity in the financial system, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The central bank said total availments under the BSP’s Peso Rediscount facility reached P14.03 billion from January to July this year or P30.2 billion lower than the P44.21 billion availed of 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 BSP said 70.8 percent of the total rediscounting loans in the first seven months of the year availed of by commercial, thrift, and rural banks went to commercial credits while 7.3 percent went to agriculture and industrial clients. The data showed that 9.1 percent went to capital expenditures, 8.8 percent to other services, 2.7 percent to permanent working capital, 1.2 percent to housing, and 0.1 percent to microfinance.

Under the exporters’ dollar and yen rediscounting facility, aggregate availments under the US dollar facility more than doubled to $122.9 million in the first seven months of the year from $57.1 million in the same period last year. The facility was offered by eight commercial banks benefiting 26 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.

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

The BSP raised its peso rediscount rate at 4.50 percent per annum under its peso rediscount facility for all maturities effective May 9. It has also pegged the rates for the month of August at 0.19110 percent per annum under the EDYRF and 0.14031 percent per annum for its Yen facility.

The BSP raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid rising global oil prices. This brought the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.

The BSP slashed key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis on the domestic economy that brought overnight borrowing rate to a record low four percent and the overnight lending rate to six percent.