BSP lifts limit on rediscount facility

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has scrapped the budget ceiling for its peso rediscounting facility, one of the central bank’s tools to plug short-term liquidity needs of banks.

This means that banks will be allowed to borrow even when total availments have already breached P20 billion, the current budget ceiling for the facility.

“Due to the rationalization of the BSP’s rediscounting facility... the BSP’s peso rediscounting window will turn into an open-volume facility effective Nov. 15 this year, meaning that requests of banks to the facility will be granted regardless of amount subject to compliance with pre-determined eligibility requirements,” BSP Governor Amando M. Tetangco Jr. said in an e-mail to reporters.

The rediscounting facility allows banks to borrow from the BSP using their clients’ promissory notes. This practice allows  banks to meet short-term liquidity needs.

The P20-billion budget for the facility has been hiked to as much as P60 billion in 2009 following the global financial crisis that started with the collapse of the Lehman Brothers Holdings Inc.

But the budget has been brought down again to P20 billion as banks borrowed less  from the facility, and as liquidity pressures lessened.

The central bank’s restructuring of the rediscounting facility results in the establishment of two separate rediscounting windows, one for universal and commercial banks, and the other for thrift, rural and cooperative banks.