The central bank’s rediscounting facility has been all but ignored by the country’s banks since the start of the year amid the availability of cheap cash that’s more than enough to fuel the country’s booming economy.
Data released Monday showed that availments of the Bangko Sentral ng Pilipinas (BSP) peso and foreign currency rediscounting facilities fell by 97 percent at the end of February.
The Bangko Sentral’s rediscounting facility ensures that, in times of tightness in credit, banks still have funds to lend to productive sectors of the economy.
Under the BSP’s peso rediscount facility, total availments of thrift and rural banks amounted to just P282 million at the end of February. This was 96.5 percent lower than the same two-month period last year.
For the second consecutive month, universal and commercial banks did not take out any loans from the facility.
Likewise, availments from the BSP’s Export Dollar and Yen Rediscounting Facility (EDYRF) dipped to just $800,000, which all went to one exporter. The availments for the two months were 97.7 percent down year-on-year.
BSP Deputy Governor Diwa C. Guinigundo in a previous interview said demand for loans from the peso and foreign exchange rediscounting facility has waned because the “banking system was generally liquid.”
Latest data from the BSP showed the country’s money supply rose by a record 38.6 percent in January, faster than the 32.7 percent expansion the month before.
This was partly due to a ban on nonpooled funds being parked in the central bank’s special deposit account (SDA) window taking effect last November. Banks were forced to withdraw the affected funds, most of which were transferred to time deposits and invested in government securities and other low-risk paper.
Recent changes in rules for the rediscounting window might have contributed to the decline in loans.
New rules passed in the second half of last year turned the rediscounting facility into an open-volume window, allowing banks to borrow as much as they want.
This change, however, came with an increase in rates.
For major banks, loan rates are now based on the BSP’s overnight lending rate, which is higher than the borrowing rate at 5.5 percent, with a corresponding premium depending on the maturity.