Bangko Sentral cuts banks' reserve requirement anew
MANILA, Philippines — The Bangko Sentral ng Pilipinas announced Thursday another round of reduction in the amount of cash that banks must hold as reserves effective December this year.
The BSP’s Monetary Board shaved 100 basis points off the reserve requirement ratio, or RRR, to 14% for universal/commercial banks and 4% for thrift banks.
RRR for non-banks with quasi-banking functions was trimmed to 14%.
The latest adjustment follows a 100-bps cut announced in September to take effect in November and a three-step RRR reduction amounting to 200 bps from May to July.
“The reserve requirement reduction is in line with the BSP’s broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs,” the central bank said.
“At the same time, the adjustment in reserve requirement ratios is aimed to ensure sufficient domestic liquidity in support of economic activity,” it added.
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, helping support the economy. 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 continued its downtrend in September to 0.9% — the slowest rate in three years.
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