Loans and Credits
The BSP extends discounts, loans and advances to banking institutions in order to influence the volume of credit consistent with objective of price stability and maintenance of financial stability. It also grants loans or advances to banking institutions in precarious financial condition or under serious financial pressures, subject to certain conditions.
The BSP's rediscount facilities have two categories, namely Peso Rediscount Facility and Exporters' Dollar and Yen Rediscount Facility, which are administered by the Department of Loans and Credit (DLC).
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 find more details 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 imposes 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 extended by the BSP. The mechanics of OCL are governed by Section 802 and Appendix 25 of the
Manual of Regulations for Banks (MORB).
The BSP also extends financial assistance to banking institutions in the form of fully secured Emergency Loan 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, as amended by R.A. No. 11211. 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 deposit substitutes and provided that any emergency advance should be
collateralized by government securities and other unencumbered first-class collaterals (primarily real estate). For more details on Emergency Loan, please see Section 285 of the MORB.