Rediscounting loans down 47%

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that total rediscounting loan availments by banking institutions fell 46.8 percent in the first 11 months of the year as the country’s banking system remained resilient amid the sovereign debt crisis in Europe as well as the economic slowdown in the US.

Data from the central bank showed that total availments under the central bank’s Peso Rediscounting facility amounted to P25.25 billion during the first 11 months of the year or P22.24 billion lower than the P47.49 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.

BSP data showed that 63.6 percent of the total rediscounting loans availed of by commercial, thrift, and rural banks in the first 11 months of the year went to commercial credits while 6.6 percent went to agriculture and industrial clients.

Futhermore, about 17.1 percent went to capital expenditures, 9.1 percent to other services, 2.8 percent to permanent working capital, 0.7 percent to housing, and 0.1 percent to microfinance.

The BSP reported that aggregate availments under the US dollar facility of the Exporters’ Dollar and Yen Rediscounting Facility surged 172 percent $191 million in the first 11 months of the year compared to a year-ago level of $70 million in the same period last year. The facility was offered by 10 commercial banks benefiting 32 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 December at 0.27144 percent per annum under the EDYRF and 0.14375 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.

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.

Since then, it has kept interest rates unchanged for five straight policy rate setting meetings since May 5 due to benign inflation as well as fragile global economic growth.

Amid external developments, the BSP said the Philippine banking system sustained its sound footing supported by solid asset growth and robust credit expansion.

Latest data showed that assets of Philippine banks posted double-digit growth of 11.8 percent to P7.4 trillion as of end-August. Universal and commercial banks accounted for the bulk or almost 90 percent of the total resources of the banking system while thrift, savings, and rural banks cornered the remaining 10 percent.

Similarly, the BSP pointed out that banks’ capital adequacy ratios (CARs) continued to reflect the stability of the industry after averaging . The banking system’s 16 percent on solo basis and17 percent on consolidated basis as of end-December 2010 was largely unchanged relative to the previous quarter’s ratios as qualifying capital grew at generally the same pace with risk-weighted assets.

The industry’s CAR continued to exceed both the statutory level set by the BSP at 10 percent and the Bank for International Settlements (BIS) international standard at eight percent.