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Philippines: BSP extends zero spread on rediscount loans
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended anew the zero spread on its peso rediscount loans by another three months 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 measures in the rediscounting facilities until April 30 through Resolution 108 issued last Jan. 28.
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 on March 20 to May 19, 2020 after Luzon was placed under enhanced community quarantine to slow the spread of the coronavirus.
It was extended to July 17 and Sept. 30 last year and to Jan. 31 this year as part of measures aimed at providing the needed liquidity to banks for purposes of maintaining price and financial stability amid the pandemic.
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 end-user borrowers.
At the height of the COVID-19 lockdown in March and April, banks tapped the facility as the spread was reduced to zero. More banks availed themselves of rediscount loans in August and September.
However, the peso rediscounting loans extended by the BSP plunged by 78 percent to P26.9 billion last year from a record P122.7 billion in 2019 amid the massive liquidity released by the central bank in the financial system.
For January alone, the BSP said there were no takers for the peso as well as the exporters’ dollar and yen rediscount facilities.
The peso rediscount rates are usually based on the latest BSP overnight lending rate plus a spread depending on the term of the loan.
At zero spread, the applicable rate for loans under the peso rediscount facility remains at 2.50 percent regardless of maturity and 2.20188 percent for US dollar, and 1.90550 percent for the Japanese yen.
Source: https://www.philstar.com/business/2021/02/11/2076813/bsp-extends-zero-spread-rediscount-loans