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Philippines: Rediscount rate for banks slashed
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has slashed its rediscount rate by 50 basis points to allow more banks to tap the facility to meet their temporary liquidity needs amid the coronavirus disease 2019 (COVID-19) pandemic.
The applicable rediscount rate for loans under the peso rediscount facility was lowered to 3.25 percent starting last Friday.
This after the BSP’s Monetary Board cut interest rates by 50 basis points during its first ever off-cycle rate setting meeting last Thursday, bringing the overnight reverse repurchase rate to an all-time low of 2.75 percent, the overnight lending rate at 3.25 percent, and the overnight deposit rate at 2.25 percent.
The BSP earlier approved a temporary reduction in the spread on peso rediscounting loans, regardless of loan maturity, relative to the central bank’s overnight lending rate to zero for a period of 60 days or until May 19.
For the month of March alone, Philippine banks borrowed P6.86 billion from the peso rediscounting loan facility. Of the total amount, loans for permanent working capital cornered the biggest share of 41.85 percent, followed by loans for capital asset expenditures with 32.23 percent.
Commercial credits represented 25.92 percent of total rediscounting loans.
Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
Loans from the peso rediscount window of the central bank jumped 71 percent to a record high of P122.17 billion last year.
The BSP also lowered the rates for the exporters’ dollar and yen rediscount facility. It has been proactive in providing the needed liquidity to banks to protect enterprises and industries amid the economic threat of the COVID-19 pandemic in the country.
Monetary authorities have committed to undertake bolder moves such as deeper rate cuts and further reduction of the reserve requirement for banks in order for the Philippine economy to have a soft landing as a result of the coronavirus pandemic.
BSP has slashed interest rates by 200 basis points since May last year, including 125 basis points for this year, reversing the tightening episode that saw rates rise by 175 basis points in 2018 due to inflation breach.
The Monetary Board as authorized BSP Governor Benjamin Diokno to reduce the level of deposits banks are required to keep with the central bank by as much as 400 basis points this year, of which 200 basis points took effect last March 30 freeing up P200 billion into the financial system.
Source: https://www.philstar.com/business/2020/04/19/2008170/rediscount-rate-banks-slashed