Mid-size banks push RRR cut

MANILA, Philippines — The Chamber of Thrift Banks (CTB) has asked the Bangko Sentral ng Pilipinas (BSP) to further reduce the level of deposits mid-size banks are required to keep with the central bank and for more regulatory relief measures to help the industry survive the global health crisis.

CTB president Cecilio Paul San Pedro said during the chamber’s first ever virtual membership meeting the reduction of the reserve requirement ratio to three percent from the current four percent would free up billions of funds to help micro, small, and medium enterprises (MSMEs) survive the novel coronavirus disease 2019 or COVID-19 pandemic.

San Pedro said further lowering of the RRR would complement the earlier temporary reduction of the minimum liquidity ratio (MLR) for stand-alone thrift, rural, and cooperative banks to 16 percent from 20 percent until the end of the year.

Mid-size and small banks are required by the central bank to maintain a stock of liquid assets proportionate to their on- and off-balance sheet liabilities to promote short-term resilience of liquidity shocks.

The liquidity ratio is expressed as a percentage of a bank’s eligible stock of liquid assets, including cash on hand, reserves in the BSP, overnight and term deposits with BSP, deposits in other banks, eligible debt securities, among others to its total qualifying liabilities.

San Pedro, who is also president and chief executive officer of Sterling Bank of Asia, said the CTB, together with the Bankers Association of the Philippines (BAP), as well as the Rural Bankers Association of the Philippines (RBAP), is pushing for more regulatory relief measures.

These measures include the extension of the effectivity of the risk-based capital adequacy framework, including the minimum capital ratios and the capital conservation buffer to January 2023 instead of January 2022, lowering of the credit risk weight of MSME loans to 50 percent instead of 70 percent, and the use of MSME loans as allowable alternative compliance with the RRR until Dec. 30, 2021.

San Pedro said the chamber is strongly supporting House Bill 6816 or the Financial Institution Strategic Transfer (FIST) bill.