LENDERS left the rediscount facility of the Bangko Sentral ng Pilipinas (BSP) untouched in July as banks remained well-capitalized and as the cut in their reserve requirement ratios (RRR) freed up more liquidity.
The BSP’s peso rediscount window was untapped anew last month, it said in a statement on Monday, marking the ninth consecutive month that the rediscount facility was not used by Philippine banks.
Last year, the rediscount window was only tapped in April, June, and October, with loans reaching P15.3 billion, more than double the P6.12 billion in 2021.
The Exporters’ Dollar and Yen Rediscount Facility (EDYRF) was also untouched in July. The last time an availment was made under the EDYRF was a dollar rediscounting loan in 2016.
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.
“The BSP rediscounting facilities remained untapped by banks so far this year, thereby manifesting the strength and resilience of the Philippine banking system, in terms of profitability, capitalization, and overall asset quality,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Philippine banking sector saw its net profit jump by 34.8% to P89.47 billion in the first quarter from P66.34 billion in the same period a year prior, BSP data showed.
“Furthermore, the recent cut in banks’ RRR also effectively freed up more funds for lending by banks, as another reason for not tapping the BSP rediscounting facilities,” Mr. Ricafort said.
In June, the central bank cut the RRR for universal and commercial banks as well as nonbank financial institutions with quasi-banking functions by 250 basis points (bps) to 9.5% from 12% previously.
Likewise, the RRR for digital banks was narrowed by 200 bps to 6% from 8%, while thrift banks, rural and cooperative banks saw a 100-bp reduction in their reserve ratios.
Moving forward, the improvement in banks’ asset quality due to still-relatively lower nonperforming loan (NPL) ratio may reduce the need for banks to tap the central bank’s rediscounting facilities, Mr. Ricafort said.
The banking industry’s gross NPL ratio went down to 3.46% of their total loan portfolio in May from 3.75% a year ago. However, it inched up from the 3.41% seen in April. The May NPL ratio is the highest since 3.53% in August 2022.
“The continued growth in deposits and overall asset growth would still allow banks to fund more loans with no or minimal need to source funds from the BSP’s rediscounting facilities,” Mr. Ricafort said.
“Banks have also been tapping the capital markets and also the interbank borrowing and lending as alternative source of funding, in lieu of tapping the BSP rediscounting facilities,” he added.
AUGUST RATESFor August, the applicable rate for peso rediscount loans will be at 7.3926% for those maturing in 90 days and at 7.5352% for those falling due in 91-180 days.
Meanwhile, dollar borrowings will be priced at 7.86400% (1-90 days), 7.92890% (91-180 days) and 7.92890% (181-360 days).
Yen-dominated borrowings will have an interest rate of 2.04750% (1-90 days), 2.05791% (91-180 days) and 2.08423% (181-360 days).
“The Peso rediscount rates are based on the BSP Overnight Lending Rate, while the United States Dollar and Japanese Yen rediscount rates are based on the applicable benchmark rates,” the central bank said.
“The applicable spread, as may be determined by the BSP, may change periodically to complement the changes in the BSP’s monetary policy goals and reflect movements in market interest rates,” it added. — Keisha B. Ta-asan