BSP wants easier rules on banks’ liquidity facility
The Bangko Sentral ng Pilipinas (BSP) is seeking to improve a short-term credit facility that eligible banks can use to meet temporary liquidity needs. The goal is to make funding more accessible and ensure support can be delivered quickly when needed.
The BSP is collecting comments from its supervised entities on a draft circular that would amend the rules governing the central bank’s Discount Window Facility (DWF).
The BSP, as lender of last resort, provides rediscounts, advances and loans to banks, the Philippine Deposit Insurance Corp. and the national government to help manage credit conditions while supporting price and financial stability.
Through the DWF, banks can access peso, US dollar or Japanese yen funding by rediscounting eligible credit instruments of their borrowers or borrowing against securities issued by the national government or the BSP.
Under the proposed changes, banks seeking a credit line would face fewer documentary and eligibility requirements. They would need to submit only a board resolution authorizing the application for liquidity support and allowing the BSP to take the necessary steps to enforce its rights over collateral.
Banks would also need to meet only three basic conditions to obtain or renew a credit line—minimum capital requirements, the required risk-based capital adequacy ratio and the absence of any outstanding default under a DWF agreement.
The proposal would give financially sound banks greater flexibility in the collateral they can use. It would also encourage banks to preposition collateral, allowing the BSP to verify borrowers’ credit instruments before funding is needed and speeding up access to liquidity.
The draft circular would require domestic systemically important banks to maintain DWF lines and conduct annual testing.
