Bangko Sentral announces another cut in banks' reserve requirement
MANILA, Philippines — The Bangko Sentral ng Pilipinas announced Friday a new round of reduction in the amount of cash banks must hold as reserves in a bid to inject more liquidity into the financial system amid easing inflation and concerns about economic growth.
The BSP said it decided to trim the reserve requirement ratio, or RRR, by 100 basis points (one percentage point) to 15% for universal banks, 5% for thrift banks and 3% for rural banks effective November.
The new round of RRR cut came following a 200-bps reduction from May to July this year.
"The adjustment in reserve requirement ratios is aimed at increasing domestic liquidity in support of credit activity,” the BSP said.
Friday’s announcement came after the BSP trimmed its benchmark rate for the third time this year by 25 bps to 4% on Thursday.
Banks are required to hold a certain amount of cash as standby funds, which do not generate returns.
The reserves cut would allow banks deploy more funds for lending and investments. Last year, the BSP trimmed the RRR twice to 18% from a global high of 20% in a bid to fuel economic growth.
The Philippine economy expanded 5.5% in the second quarter, weaker than 5.6% recorded in the preceding three months after the delayed approval of the 2019 budget disrupted state spending.
Meanwhile, inflation eased further to 1.7% in August — the slowest rate in three years.
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