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Loans, Credit and Asset Management

Loans and Credit Operations

Rediscounting

Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary liquidity needs by refinancing the loans they extend to their clients. Through the facility, the BSP also makes possible the timely delivery of credit to all productive sectors of the economy. Moreover, rediscounting is one of the monetary tools of the BSP to regulate the level of liquidity in the financial system. The BSP’s rediscounting is administered by the Department of Loans and Credit.

You may download the FAQ on Rediscounting here.

Overdraft Credit Line

The BSP also makes available an overdraft credit line (OCL) to banks participating directly in the clearing operations of the Philippine Clearing House Corporation to cover shortfalls in the banks’ demand deposit accounts with the BSP arising from clearing operations. The BSP will impose a ceiling on the amount of overdraft a bank may incur due to failure to cover clearing losses through interbank borrowings and/or repurchase agreements with BSP. The ceiling is defined as the sum of clean OCL equivalent to 15% of the bank’s rediscounting line with BSP and the collateralized OCL that will be imposed by the BSP. A bank not meeting the following criteria:

1. CAMELS composite rating of at least “3”;

2. CAR of at least 10%; or

3. No chronic reserve deficiencies for the immediately preceding one year, or other measures as may be defined by the BSP for this purpose, should apply for a collateralized OCL in an amount equivalent to at least 5% of its demand deposit liabilities as of end of month, two months prior to the date of application with the DLC; otherwise, its outward clearing items shall be subject to second day value dating. A bank which meets the above criteria may also apply for collateralized OCL in any amount.

Emergency Loans

The BSP also extends financial assistance to banking institutions in the form of fully secured liquidity (emergency) loans as a temporary remedial measure to help solvent banks overcome their liquidity problems arising from causes beyond their control, pursuant to Section 84 of R.A. No. 7653. The assistance shall be limited to the amount needed by the applicant bank to overcome the emergency or financial predicament but shall not exceed 50% of its deposits and provided that any emergency advance should be collateralized by government securities and unencumbered first-class collateral (primarily real estate).