The Bangko Sentral ng Pilipinas (BSP) on Wednesday announced discontinuing its rediscounting window and replacing it with the Discount Window Facility (DWF) in keeping with global best practices.
Under the change, the DWF will begin operations when BSP Circular 1202 dated 24 September 2024 takes effect two months from its publication or by November this year.
Also under the new window, the BSP that for now only rediscounts loans collateralized with government securities (GS), allows banks to offer their GS and BSP securities holdings in exchange for advances.
This widens the range of instruments that may be brought before the rediscounting window and at the same time present the BSP an additional avenue for influencing credit volume consistent with its goals of maintaining price and financial stability.
DWF lines approved under the new circular can be tapped by banks either by rediscounting loans or by offering their GS and BSP securities for advances.
Banks may tap existing rediscounting lines until these lines expire a year after their effectivity, but only for rediscounting loans, the BSP said.
Banks typically exchange their loan receivables at a discount to their face value in exchange for cash that they then deploy as new loans.
The rediscount is pegged to the BSP’s lending rate plus a spread.
The various banks use it for quick access to liquidity.
