Out of the total amount disbursed under the peso rediscount facility from January to March, the BSP said the bulk or 56 percent went to other credits particularly for capital asset expenditures with 38.4 percent, other services with 9.6 percent, and permanent working capital with 7.
Rediscount loans extended to local banks to finance the expansion needs of businesses and households hit a record P71.52 billion last year amid the series of interest rate hikes by the central bank to check rising inflation.
Being a new bank, having a large share of assets in loans, and having a large share of loans rediscounted
decreases the expected time until the bank fails.
To perform that role, Federal Reserve Banks were given a lending facility--their discount windows--through which they would rediscount eligible financial assets for member commercial banks in exchange for currency or reserve deposit balances.
The Federal Reserve Act provided that "any Reserve Bank may discount notes, drafts, and bills of exchange arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial purposes." In addition, to be eligible for rediscount, agricultural paper could have a maturity of no more than six months, whereas nonagricultural paper had to mature in 90 days or less.
The limits that the Fed's founders placed on the type of securities eligible for rediscount with Reserve Banks reflected conventional banking principles of the time, the so-called Real Bills Doctrine.
Apparently, the authors of the Federal Reserve Act believed it more important to specify precisely the type of securities that would be eligible for rediscount than to specify criteria for setting the discount rate.
acceptance market by permitting Federal Reserve Banks to acquire acceptances by rediscount or open market purchase.
Instead of concentrating on the money stock, the price level, and other indicators featured in the quantity theory, the Fed focused on such measures as the level of market interest rates, the volume of member bank borrowing, and the type and amount of commercial paper eligible for rediscount at the central bank.
Consequently, the second stage saw Fed officials in the period 1919-1922 correct those omissions by incorporating into the doctrine a representation of the central bank's rediscount function.
Accordingly, when the Fed measured output and prices, it did so not with the Fisherian intention of attributing their movements to an excess or deficient money stock, but rather with the intention of estimating, or predicting, the supply of real bills it would be called upon to rediscount so member banks might obtain sufficient reserves to accommodate business demands for credit.
When the Federal Reserve Act authorized Reserve Banks to rediscount bank paper, it introduced a new element into the real bills version of the monetary transmission mechanism.