Rediscounting loans down 56.5% in Jan-Sept

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that total rediscounting loan availments by banking institutions fell 56.5 percent in the first nine months of the year as the country’s resilient banking system remained awash with cash brought about by the strong inflow of foreign capital into emerging market economies including the Philippines.

Data released by the BSP yesterday showed that total availments under the central bank’s Peso Rediscount facility amounted to P20.12 billion from January to September this year or P26.1 billion lower than last year’s P46.28 billion.

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 62 percent of the total rediscounting loans in the first three quarters of the year availed by commercial, thrift, and rural banks went to commercial credits while 6.9 percent went to agriculture and industrial clients. The data showed that 18.8 percent went to capital expenditures, 8.9 percent to other services, 2.5 percent to permanent working capital, 0.8 percent to housing, and 0.1 percent to microfinance.

It added that aggregate availments under the US dollar facility of the Exporters’ Dollar and Yen Rediscounting Facility jumped 190.3 percent $171.6 million from January to September compared to $59.1 million in the same period last year. The facility was offered by 10 commercial banks benefiting 27 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.

It also raised the reserve requirement ratio for banks by a combined 200 basis points last June 16 and July 28 bringing the threshold to 21 percent from 19 percent to siphon off close to P70 billion from the financial system to curb additional inflationary pressures arising from excess liquidity from strong foreign capital inflows.