The Bangko Sentral ng Pilipinas (BSP), swamped by banks National Food Authority (NFA) rediscounted loans, has put a cap on these loans to reduce exposure to the problematic government corporation.

In a letter dated June 5, BSP director for loans and credit Rosalinda S. Dumalang said a P3-billion limit will be imposed on any banks availing of the rediscounting facility if these banks are using outstanding NFA papers.

“The ceiling applies only to NFA rediscounting loans,” said Dumalang. “Banks whose NFA rediscounting loans exceeded the rediscounting limit were given 90 days (or) until May 31 to comply with the ceiling.”

She further explained that the reason for the cap is to allow other equally important productive sectors of the economy to have greater access to the rediscounting facility to address their liquidity requirements.”

At the moment, sources said the BSP is holding too many NFA papers and for the institution’s protection, officials would like to limit exposure to the NFA whose debt outstanding was estimated to have reached P35 billion as of end-2008.

BSP’s loans under its peso rediscount facility totaled P52.065 billion as of May 31, out of total budget of P60 billion. Of this amount, 87.3 percent were commercial credits, 4.3 percent were agricultural and industrial credits, and 8.4 percent were other credits (capital expenditures, working capital, housing and microfinance).

The Commission on Audit (COA) has lately asked the Monetary Board to give it permission to review and appraise the rediscounting credit facility to see if loan valuations are "correct."

The BSP has agreed to open its rediscounting books to CoA but prohibited it from doing the same to private banks.

BSP sources said CoA had originally wanted to audit rural banks that have availed of the rediscounting facility.

CoA argued that they have done this before in the 1990s. The BSP credit and loans department apparently allowed CoA to audit the books of rural banks at the time but the current Monetary
Board has thumbed down the proposal.

In March the BSP liberalized its rediscounting facility to allow banks easier access to credit and liquidity from the central bank.

The BSP raised the loan value of all eligible rediscounting papers from 80 percent to 90 percent of the outstanding balance of a borrowing bank’s credit instrument, but not to exceed 70 percent of the appraised value of the underlying collateral.