Rediscount Facility Left Untouched In August

Banks continued to leave the rediscount facility of the Bangko Sentral ng Pilipinas (BSP) untapped in August due to ample liquidity in the financial system.

The BSP added that its Exporters’ Dollar and Yen Rediscount Facility (EDYRF) also remained unused in August.

The central bank reported that its peso rediscount window remained untouched last month, marking the 10th consecutive month that the facility was not used by banks.

In 2022, the rediscount window, which allows banks to access additional money supply by posting their collectibles from clients as collateral, was only utilized in April, June, and October, with loans reaching P15.3 billion, more than double the P6.12 billion in 2021.

The BSP added that its Exporters’ Dollar and Yen Rediscount Facility (EDYRF) also remained unused in August. The last time an availment was made under the EDYRF was for a dollar rediscounting loan in 2016.

Bankers explained that there were no rediscount loans last month because there was still sufficient liquidity in the financial system amid easing credit demand.

Outstanding loans of major banks expanded by 7.8% to P10.99 trillion in June from P10.19 trillion a year earlier, according to BSP data. Loan growth was slower than the 9.4% recorded in May and the 12.1% in June 2022.

This slowdown in lending growth was attributed to elevated inflation and high interest rates. Banks refrained from using the facility due to their earnings growth.

The banking industry saw its net profit increase by 24.7% to P178.51 billion in the first half from P143.12 billion in the same period in 2022, while the gross nonperforming loan ratio of the banking industry slipped to 3.42% in June from 3.46% in May and 3.6% a year ago.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort observed that "fundraising or capital-raising activities of some banks also increased their funds/liquidity for lending, investments, and other expansion activities, thus all of these factors contributed to increased liquidity/funding in the banking system, allowing banks once again not to tap the BSP rediscounting facilities, one of the last options available to them."

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