With regard to the establishment of a central bank, Warburg believed that American commercial paper would only become considered a "quick" asset if a safe proportion of those assets could be rediscounted
. This goal could be achieved most directly if there was a central bank ready to buy those assets.
Hence, when such loans were offered to Reserve Banks in exchange for currency or reserve balances, the Reserve Banks rediscounted
the paper at the current discount rate.
He also stated that under Regulation J acceptances which had been renewed after the delivery of the goods collateral were merely ineligible for rediscount; provided that they were not rediscounted
, there was no rule preventing the re-extension per se of acceptances by American banks.(46)
For all banks with rediscounted
loans, the BSP is also granting a 60-day reprieve to settle outstanding loans in affected areas.
loans are bank receivables that are sold to the central bank for extra funds, which can subsequently be lent out to businesses and individual borrowers.
Among the BSP's temporary relief measures is also the granting of a 60-day grace period to settle the outstanding rediscounting obligations as of January 17 with the BSP of all rediscounting banks in the affected areas and allowing banks to restructure with the BSP, on a case-to-case basis, the outstanding rediscounted
loans of borrowers affected by the calamity.
Loans taken out by smaller thrift and rural banks also fell to P36 million or 99.2 percent less than the P4.32 billion in rediscounted loans they tapped in the same month last year.
Rediscounted loans are bank receivables that are sold to the central bank for extra funds that can subsequently be lent out to businesses and individual borrowers.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said rediscounted loans by commercial, thrift, and rural banks fell by 44.1 percent year on year to P16.409 billion at the end of August.
The BSP said 81.7 percent of the rediscounted loans at the end of the month went to commercial credits, 3 percent went to agricultural and industrial loans, while 15.3 percent went to other sectors.
Demand for rediscounted
loans declined as the banking industry remained highly liquid and adequately capitalized during the period.