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FROM -- Business Mirror / Monday / March 23, 2009
This article tells how the Central Bank of the Philipines buys back loans from banks to allow the banks to sell more loans.
From a Google search for "Bangko Sentral" --- "The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. It was established on 3 July 1993 pursuant to the provisions ..."
What nonsense. It turns the banks into sales agents for the Central Bank and, of course, makes the small banks less inteterested in the success of the loans. (mrc)
This is precisely what lead to the U.S.A. money and banking collapse in 2009 -- mrc
There is no reason why each small bank can't lend without end -- since, in Fractional Reserve Banking, every loan "creates its own collateral". (mrc)
(HEADLINE) -- Big (Commercial Banks) tap bulk of rediscounting budget / Banking & Finance / Written by Jun Vallecera / Reporter / Wednesday, 11 March 2009 20:12
The Bangko Sentral ng Pilipinas (BSP) would rather that the bulk of its rediscounting budget be gobbled up by the retailing thrift banks than by large commercial banks.
According to Deputy BSP Governor Diwa Guinigundo, some 89 percent of the estimated P36-billion rediscounting budget actually tapped by all banks thus far went to the large commercial banks rather than to their rural-based thrift bank cousins.
“This proves there is demand,” Guinigundo said of the budget recently upsized from P20 billion to P40 billion and finally to P60 billion at the start of the month. Rediscounting allows banks to convert their receivables into cash with the BSP and turn around quickly and make still more loans for profit. (bold added by mrc) What they lose from the discount they make up for in volume.
Guinigundo said only around 10 percent or 11 percent of BSP’s rediscounting budget goes to thrift banks. If he can help it, he would rather that the bulk of the money went to the small banks that do retail rather than institutional banking.
“To me, I’d rather that the small banks get the bulk of the budget because they get to the grassroots a lot quicker. Of course, the larger commercial banks generate potentially more multiplier impact,” he said on Wednesday.
He noted thrift banks have only recently started extending support finance to the National Food Authority, which warehouses palay directly from farmers.
This assistance used to be exclusively obtained from the large commercial banks, Guinigundo said.
The rediscounting window is one channel by which the BSP pursues its broad goal of providing price stability across the economy.
That ability, however, is being compromised by its lack of sufficient capital no matter that an existing law guaranteed its full completion soon after its enactment in 1993.
The BSP charter, under Republic Act 7653, mandated the government to complete its P50-billion capitalization program after the initial P10 billion was infused in 1995.
That P40 billion had been scrapped for the time being to allow the government to pursue its P330-billion fiscal-stimulus program without letup.
PHOTO -- BANGKO Sentral would have preferred that the bulk of rediscounting money went to the thrift banks that do retail rather than institutional banking. FILE PHOTO