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Loans and advances released by the central bank to supervised financial institutions totaled P89.5 billion as of end-November 2024, up by 7.4 percent from same period in 2023 of P83.3 billion.
Based on Bangko Sentral ng Pilipinas (BSP) data, the latest amount was lower than end-October 2024 of P124.7 billion.
Banks can apply for discounts, loans and advances from the BSP when under “precarious financial condition” or under serious financial pressures including liquidity problems.
The BSP can grant emergency loans or advances to banks so long as these are not insolvent. If a bank’s monetary and banking stability are being threatened, such as extraordinary heavy withdrawals of deposits for successive days, the bank can tap the emergency loan facility.
Banks can also ask the BSP for a loan or advance during normal periods when they have liquidity pressures due to unforseen events. Basically, the financial assistance to banks as fully secured emergency loans are temporary remedial assistance for solvent banks with liquidity problems that are beyond their control.
Loans and advances to the Philippine Deposit Insurance Corp. accounted for a large portion of BSP releases, while the rest are channeled through its loan facilities that have fixed terms and lending rates.
Banks and non-banks can also avail of the discount window facility or DWF, formerly the rediscounting loan facility. The DWF enables banks to directly offer government-issued securities and central bank bills in exchange for advances against these securities.
During the pandemic, the government became the highest borrower from the BSP after taking out P1.1 trillion in 2021. This increased the BSP loans and advances by 90.5 percent versus P566.9 billion in 2020.
The first loan was granted in March 2020 in the amount of P300 billion. The following extensions were raised to P540 billion in October 2020, January 2021 and in April 2021.
The BSP can advance to the government a max of 20 percent of the National Government average income for the last three years.
The BSP’s charter allow it to extend provisional advances as a temporary arrangement with the government for cash resources while revenue generation is still relatively inadequate due to the pandemic and lockdowns.
