The Monetary Board (MB), in its meeting dated 09 July 2020, approved the extension of the temporary reduction of the term spread on Peso rediscounting loans relative to the overnight lending rate to zero, regardless of maturity (i.e., 1-180 days), for additional 75 calendar days or until 30 September 2020, among others, as part of BSP’s measures aimed at providing the needed liquidity to banks for purposes of maintaining price and financial stability amidst the Coronavirus Disease 2019 pandemic in the Philippines. Also, the MB approved the reduction of the spread on United States (US) Dollar and Japanese Yen rediscounting loans, thereby reducing the applicable rediscount rates to the 90-day London Interbank Offered Rate plus 200 basis points, regardless of maturity (i.e., 1-360 days), until 30 September 2020, subject to further extension as may be approved by the MB.
As such, the applicable BSP rediscount rate for loans under the Peso Rediscount Facility remains at 2.75 percent, regardless of loan maturity (i.e., 1-180 days), while rediscount rates for loans under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) for the month of July 2020 have been set at 2.30788 percent for US Dollar and 1.95617 percent for Japanese Yen, regardless of loan maturity (i.e., 1-360 days).
For the period covering 01 January to 30 June 2020, total availments1 under the Peso Rediscount 2 Facility amounted to ₱20.7 billion. These availments represent borrowings against banks’ credits on transactions related to Commercial and Other Credits. Other Credits, which comprise of 76.53 percent of the total rediscounting loans, pertain to bank loans for capital asset expenditures (62.67 percent) and permanent working capital (13.86 percent). Meanwhile, Commercial Credits which is at 23.47 percent of total rediscounting loans pertain to bank loans for importation (14.20 percent) and trading (9.27 percent) of goods.
There was no availment under the EDYRF during the 1st semester ending 30 June 2020.
The MB’s decision on the BSP’s rediscount rates is still in line with its accommodative stance to further ease the cost of borrowing and ensure ample credit and liquidity in the financial system as the economy transitions toward recovery.
1 Rediscounting availments are classified by type of underlying credit (i.e. Commercial, Production and Other Credits) based on the eligible papers offered by banks as collateral. The BSP does not allocate credits on specific sectors nor engage in development banking or financing in accordance with Section 128 of Republic Act (R.A.) No. 7653, as amended by R.A. No. 11211, otherwise known as “The New Central Bank Act”.
2 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. These eligible papers include credit instruments such as promissory notes, drafts or bills of exchange of the following nature: a) Commercial Credits – resulting from the importation, exportation, purchase, sale, local transportation or storage of non-perishable and insured goods or products in authorized bonded warehouses or in other places approved by the MB; b) Production Credits – used for production or processing of agricultural, animal, mineral, or industrial products; or c) Other Credits – special credit instruments such as but not limited to microfinance, housing loans, services, agricultural loans with long gestation period, and medium and long-term loans.
Source: Bangko Sentral ng Pilipinas (BSP)