BSP discount loans to banks hit P2.8B | Inquirer Business

BSP discount loans to banks hit P2.8B

/ 10:54 PM February 10, 2012

Discount loans secured by banks from the Bangko Sentral ng Pilipinas more than tripled in January from a year ago, as the recent cut in the BSP’s key policy rates encouraged borrowings.

Data from the BSP showed that it extended P2.79 billion in loans to banks through its re-discounting facility, up from P904 million in the same period last year.

In January, the BSP cut its key policy rates by 25 basis points to help accelerate the growth of the economy following the slowdown last year. The move was also meant to counter the potential ill effects of the uncertainties in the global economy.

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The cut brought down the central bank’s overnight borrowing and lending rates to 4.25 and 6.25 percent, respectively.

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The interest rate charged by the BSP on discount loans is based on the overnight borrowing rate.

Loans extended through the BSP’s rediscount facility are meant to support lending operations of banks, ensuring that they are able to continue lending to individual and corporate borrowers even if they are tied with receivables.

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The banks’ receivables serve as collateral to back the discount loans from the BSP. The amount of loans extended represent the discounted value of the said collateral.

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Regulators said the rise in discount loans was an indication of the banks’ rising lending operations.

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Banks are urged to lend more, they said, especially since the economy needed a boost from domestic sources to counter the dampening effects on growth of the lackluster demand for the country’s exports.

Economists expect global demand for Philippine-made goods to remain anemic this year on the back of the prolonged debt crisis in the Euro zone, a key export market for many emerging economies.

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For this reason, BSP officials said the Philippines had to rely more on domestic growth drivers.

Banks play a crucial role in accelerating the growth of the economy, as bank loans support consumption of households and investment activities of enterprises.

Last year, outstanding loans of universal and commercial banks in the country grew by 19.3 percent to P2.79 trillion.

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The BSP said that even if credit growth was robust last year, banks can still lend more given their liquidity.

TAGS: banks, Business, discount loans, key policy rate

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