BANKS left the rediscount facility of the Bangko Sentral ng Pilipinas (BSP) untouched in May amid excess liquidity in the financial system.

The BSP said on Wednesday that its peso rediscount window was untapped last month, marking the seventh straight month that the rediscount facility was not used by lenders.

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.

There were likewise no availments made under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) last month.

The last time the EDYRF was tapped was for a dollar rediscounting loan in 2016.

The BSP’s rediscount facility 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 continued excess liquidity in the financial system provided banks with options/alternatives for funding sources other than tapping the BSP rediscounting facilities,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Domestic liquidity rose by 6.6% annually to P16.3 trillion in April, faster than the revised 6.2% expansion in March.

Mr. Ricafort added that banks have the option to raise short-term funding through deposits, interbank loans, and swaps markets, while for longer-term funding, they may tap the capital markets.

Lenders did not borrow from the BSP’s rediscount facility as their overall nonperforming loan (NPL) ratio is still among the lowest since the pandemic, he said.

The banking industry’s soured loans dropped by 9.9% year on year to P414.612 billion in March from P460.458 in the same month last year.

However, this is 0.8% higher than the P411.186 billion in February, based on the latest data from the central bank.

This brought the banking system’s NPL ratio to a four-month high of 3.33% in March, up from 3.31% a month prior but easing from 4.08% in March 2022, BSP data showed.

“Higher interest rates or borrowing costs since last year somewhat slowed down the demand for loans and correspondingly reduced the need for some banks to finance new loan releases,” Mr. Ricafort added.

The Monetary Board had hiked benchmark interest rates by 425 bps from May 2022 to March this year before pausing last month, with the key rate now at 6.25%.

“Improved profitability and capitalization of banks also reduced the need for banks to tap the BSP rediscounting facilities,” Mr. Ricafort said.

JUNE RATES
For June, the applicable rate for peso rediscount loans will be at 7.3605% for 90 loan maturity days and at 7.471% for 91-180 days.

Meanwhile, dollar borrowings will be priced at 7.74050% (1-90 days), 7.76350% (91-180 days), and 7.76350% (181-360 days).

Yen-dominated borrowings will be priced at 2.06000% (1-90 days), 2.07375% (91-180 days), and 2.10300% (181-360 days). — Keisha B. Ta-asan

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