The Philippines: BSP’s rediscount window untapped

  • LENDERS left the rediscount facility of the central bank untouched in May 22 as there was ample liquidity in the financial system.
  • The Bangko Sentral ng Pilipinas (BSP) said on 7 Jun 22 that its peso rediscount window was untapped anew in May 22 following the PHP4.08bn availment by a universal bank in Apr 22.
  • In 2021, banks only tapped the facility in Jun, Jul, and Sep 22. These peso rediscount loans amounted to PHP6.12mn.
  • The BSP’s rediscount window gives banks access to additional money supply by posting their collectibles from clients as collateral.
  • In turn, banks may use the cash — denominated in peso, dollar or yen — to extend more loans to their corporate or retail clients and service unexpected withdrawals.
  • Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said there were no rediscount loans in May 22 amid “continued excess liquidity in the financial system as the banks have other alternative sources of funding, such as the interbank market and through capital markets.”
  • Bank lending jumped by 10% in Apr 22, reflecting the rebound in economic activity as restrictions were eased alongside the steady decline in coronavirus cases.
  • This was the fastest loan growth seen in 23 months or since the 11.2% in May 20.
  • Preliminary data from central bank showed outstanding loans of big banks expanded by 10.1% to PHP9.9tr in Apr 22 from PHP8.99tr in Apr 21.
  • As lending increased, M3, which is considered as the broadest measure of liquidity in an economy, grew by 7.3% to PHP15.3tr in Apr 22 y/y.
  • The declining trend in banks’ nonperforming loan (NPL) ratio also reduced the need for lenders to tap the BSP rediscounting facility, Mr. Ricafort said.
  • The banking industry’s gross NPL ratio went down to 4.08% in Mar 22 from 4.21% in Mar 21. It is also lower than the 4.24% seen in Feb 22.
  • The Mar 22 ratio is the lowest since the 4.1% logged in Dec 21.
  • For Jun 22, the applicable rate for peso rediscount loans will remain at 2.75%, regardless of maturity.

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