The BSP extends discounts, loans and advances to banking institutions in order to influence the volume of credit consistent with the objective of price stability, pursuant to Section 82 of R.A. No. 7653 or The New Central Bank Act. Loans or advances may be granted to banking institutions in periods of emergency or imminent financial panic, or even during normal periods to assist a bank in a precarious financial condition or under serious financial pressures, subject to certain conditions.
When availing of the loan facilities of the BSP, banks assign to BSP the loans that they extended to their borrowers, including the underlying collaterals, and other acceptable collaterals. Upon failure of these banks or their borrowers to pay their loans, the BSP takes possession of the underlying collaterals of loans, and other acceptable collaterals, assigned to BSP. Banks also pay their loans with properties under a dacion en pago agreement. As such, the BSP has acquired assets which it administers, preserves and disposes properly.