Local banks had enough cash to meet the demand for financing from businesses and households at the end of May, as reflected by the tepid demand for fresh liquidity from the central bank’s rediscounting facility.
Data from the Bangko Sentral ng Pilipinas (BSP) showed the continued reduction in the use of the rediscounting facility, which allowed banks to borrow money from the central bank, backed by loan receivables.
At the end of May, total availments of thrift and rural banks amounted to P179 million, down 72 percent from P640 million a year ago.
Out of the total availments for the period, 85 percent went to commercial credits, 2.8 percent to production credits and 12.2 percent to other credits consisting of housing (5.3 percent), permanent working capital (3.7 percent) and capital expenditures (3.2 percent).
The BSP’s exporters dollar and yen rediscounting facility (EDYRF) was similarly ignored. Only one universal bank got liquidity from the dollar facility, totaling $700,000. This translates to an 83.7-percent decrease from $4.3 million in the same period last year.
The BSP’s rediscounting facility ensures that, in times of tightness in credit, banks will still have funds to lend to productive sectors of the economy. Banks can borrow money from the rediscounting facility, with loan receivables put up as collateral.
However, the amount of loans banks get from the rediscounting facility has been falling steadily since last year due to the availability of cheap cash in the financial system.
The drop in rediscounting loans shows enough money continues to circulate in the economy, despite recent numbers showing a slowdown in domestic liquidity growth.