That even the less financially endowed lenders would not touch the rediscounting window of the Bangko Sentral ng Pilipinas only shows the financial system has sufficient money in circulation to feed a growing economy without driving inflation higher.
Thus said two of the most dynamic bankers in the business who told Bankero.com.ph that the banks’ collective refusal to go up the rediscounting window means the various banks have enough funds at their disposal to finance their respective operations.
“I think the reason for the low take up of the rediscounting facility is because banks are holding to so much liquidity that they don’t need much additional funding,’” bankero Tony Mocupa, vice chairman, president and CEO at East West Bank, said in a text message
The rediscounting window is a mechanism allowing banks to sell their receivables to the BSP not at their face value but at a lower or discounted rate. Banks compensate for the subpar cash value of the instruments in their hands by quickly turning around and extending the funds as new loans and generate even more earnings from them.
Latest BSP data show the financial system as sufficiently liquid as bank executives assess it, with M3 reaching P15.317 trillion in January this year, up 9.7 percent on annual basis.
M3 is really just money in the financial system available to you and me that the BSP adds to or subtracts from time to time to ensure that their continued circulation does not breed inflation or inflationary pressure.
“Whether it (rediscounting window) will be used in the future will depend on the prevailing market conditions. It is comforting to know there is available funding but actual usage will be defined by needs,” Moncupa explained.
At the Philippine National Bank where bankero Wick Veloso is president and CEO, he said banks requiring liquidity boosts could always take advantage of the overnight lending window of the BSP to address temporary shortage of funds.
“If banks require funding, they can tap the overnight lending facility of the BSP,” he said.