BSP Officer-In-Charge Nestor A. Espenilla, Jr. announced today that the Monetary Board has approved the restructuring of the BSP rediscounting window to align it further with the BSP’s market-based monetary operations framework and with the international central banking practice of scaling down directed credit operations. The banking and export industries were consulted earlier by the BSP to ensure that their views were taken into account in the implementation of the operational adjustments in the BSP rediscounting facilities.
Effective 15 November 2013, the BSP will establish for a prescribed period two separate rediscounting windows, one for universal and commercial banks (U/KBs), to be called the Rediscounting Window (RW) I, and one for thrift banks (TBs), cooperative banks (coop banks), and rural banks (RBs), to be called RW II. The operational features of the two peso rediscounting windows are summarized in Annex 1.
Thrift banks, coop banks, and RBs shall be able to access RW II at existing terms, but with a specified term premium per loan tenor, and only for a transition period of five years for TBs and ten years for coop banks and RBs. These banks are expected to use the transition period to improve their deposit mobilization capacities and increase the utilization of other funding sources, thus reducing their dependence on BSP funding over time. By November 2018, TBs will no longer have access to the RW II, while coop banks and RBs will have access to the RW II only until November 2023. By November 2023, the RW II will no longer be operational and all banks shall access only RW I.
Banks will be able to access RWs I and II on an open-volume basis consistent with the objective of reorienting the BSP rediscounting window as a regular liquidity standing facility. This implies that requests of all banks to access the facility will be granted regardless of amount, subject to compliance with pre-determined eligibility requirements.
The eligibility requirements for accessing both RWs I and II will be the same as those currently in effect in the BSP rediscounting window. Meanwhile, the terms on outstanding rediscounting loans as of the date of effectivity for the two windows will remain in effect unless these loans are subject to annual repricing.
At the same time, the Monetary Board also approved operational adjustments in the Exporters Dollar and Yen Rediscount Facility (EDYRF). The range of acceptable collateral accepted in the facility was broadened, particularly to include dollar-denominated trust receipts (TRs) covering the importation of goods and raw materials, and dollar term loans to finance capital expenditure (CAPEX) or plant expansion/modernization of exporters. The reform of the pricing in the EDYRF was also undertaken. The revised operational features of the EDYRF are presented in Annex 2.
The Monetary Board noted that to the extent that Philippine exports have a sizeable import content, the acceptance of dollar-denominated TRs and term loans as eligible collateral will help support export financing. This will also enhance the incentive for banks to lend to firms for the importation of raw materials used in the manufacture of export commodities, providing exporters greater access to credit. Meanwhile, the new EDYRF pricing scheme, consisting of the 90-day LIBOR plus a risk premium of 200 basis points and a term premium for longer maturities, will help encourage banks to first seek market-based sources of dollar liquidity before turning to the BSP. The operational adjustments in the EDYRF will also take effect on 15 November 2013.
The revised guidelines for the BSP peso rediscounting facility and EDYRF are specified in BSP Circular Nos. 806 and 807 series of 2013, both dated 15 August 2013.
The rationalization of the BSP rediscounting window further realigns the BSP’s rediscounting policies towards market-based liquidity provision. The BSP remains committed to providing the appropriate level of liquidity to the banking system to ensure sustained funding for the country’s growth requirements to the extent that the inflation outlook will allow. Going forward, the BSP will continue to assess the entire array of monetary policy instruments at its disposal to ensure their effectiveness in promoting the BSP's price and financial stability objectives conducive to a balanced and sustainable growth of the economy.
View Annex 1 | Annex 2