Rediscounting loans down 37% in January-July

MANILA, Philippines - Loans extended by the Bangko Sentral ng Pililipinas (BSP) under its rediscounting facility declined in the first seven months of the year as the banking industry remained highly liquid and adequately capitalized during the period.

In a report released yesterday, the BSP said loans it extended under the rediscounting facility went down 37 percent to P15.908 billion in January to July this year from P25.295 billion a year ago.

The BSP rediscounting facility allows banks to borrow from the central bank, charged with an interest pegged on the overnight borrowing rate. The borrowing rate currently stands at a record-low of 3.5 percent.

Borrowed funds are then used to support lending activities of banks, especially to specific sectors such as agriculture and exports.

“There is so much liquidity so banks have less need to tap it,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., in a phone interview.

Broken down, the BSP said 82.3 percent of the availments went to commercial activities which include financing to large-scale projects. A total of 2.8 percent, on the other hand, were used for agricultural and industrial programs.

The remaining 14.9 percent were tagged as “other credits,” which included financing for capital expenditures (7.5 percent), permanent working capital (0.6 percent), housing (0.1 percent) and “other services” (6.7 percent).

Aside from peso loans, banks also winded down their dollar borrowings from the central bank under the Exporters Dollar and Yen Rediscount Facility.

Figures showed a total of $84 million were lent by the BSP to 29 exporters for the first seven months of the year. This was a decrease of 24 percent from previous year’s $110.5 million.

No yen availments were recorded during the period, the central bank said.

The BSP has repeatedly highlighted the strength of Philippine banks based on their capitalization and adequate liquidity to support economic growth.