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Philippines: BSP extends zero spread on peso rediscounting loans
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has granted a final extension of the zero spread on its peso rediscount loans anew until end-June to allow banks to tap the facility to meet their temporary liquidity needs amid the pandemic.
BSP Governor Benjamin Diokno said the Monetary Board approved the extension of the temporary measure in the rediscounting facilities anew through Resolution 405 issued on March 23.
“As the BSP begins to observe indications of a durable economic recovery, we continue to carefully develop our plans for the eventual withdrawal of the extraordinary liquidity measures we deployed in response to the pandemic,” Diokno said.
The BSP first approved the temporary reduction in the spread on peso rediscounting loans usually used for capital asset expenditures, permanent working capital, among others relative to the central bank’s overnight lending rate to zero initially in March 20 to May 19, 2021 after Luzon was placed under enhanced community quarantine to slow the spread of the COVID virus.
It was extended to July 17 and Sept. 30 last year and to Jan. 31, April 30, July 31, Dec. 31 last year, March 31 and finally to June 30 as part of measures aimed at providing the needed liquidity to banks for purposes of maintaining price and financial stability amidst the global health crisis.
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.
“The BSP observed that banks have more than adequate liquidity to meet their requirements given that there have been no availments of the rediscounting facility as of March 25 this year,” Diokno said.
On the other hand, Diokno said the reduction of the term spread on rediscounting loans under the Exporters’ Dollar and Yen rediscount facility (EDYRF) to the 90-day London interbank offered rate plus or other applicable benchmark, plus risk premium ended on March 31.
The BSP said it would ensure that its policy instruments remain appropriately calibrated to ensure sustainable and non-inflationary economic growth, in keeping with its price and financial stability mandates.
The BSP emerged as one of the most aggressive central banks in the world to cushion the impact of the COVID-19 pandemic on the economy. It slashed interest rates by 200 basis points to an all-time low of two percent and lowered the reserve requirement ratios of banks.
Source: https://www.philstar.com/business/2022/04/07/2172747/bsp-extends-zero-spread-peso-rediscounting-loans