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Philippines: BSP cuts RRR for mid-sized, small banks
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has lowered the reserve requirements for mid-size and small banks by 100 basis points to increase the capacity of the industry to further support the micro, small and medium enterprises (MSMEs).
BSP Governor Benjamin Diokno said the reserve requirement ratio for thrift banks would be lowered to three percent from four percent, while that of rural and cooperative banks would be reduced to two percent from three percent effective July 31.
“The reduction is expected to increase lending capacity of these banks to support financing requirements of their MSME, as well as rural community-based clients. It will also help lower intermediation costs and ease financial strain faced by these banks’ customers,” Diokno said.
The BSP chief said the lowering of reserve requirements for thrift, rural, and cooperative banks by 100 basis points would free up about P10 billion in additional liquidity into the financial system.
Data from the BSP showed that the deposit liabilities of mid-size and small banks currently stand at P1 trillion.
Last March 30, the Monetary Board slashed the RRR for big banks by 200 basis points to 12 percent from 14 percent, freeing up P200 billion into the financial system.
Diokno has committed to bring down the RRR for universal and commercial banks to single digit level by the end of his term in the middle of 2023. The BSP has so far slashed the RRR by 800 basis points from a high of 20 percent in 2018.
“This move is also part of the BSP’s omnibus package of reforms aimed at assisting the banking public with their liquidity requirements during the COVID-19 pandemic and supporting the transition toward a sustainable recovery during the post- crisis period,” Diokno said.
Suzanne Felix, executive director of the Chamber of Thrift Banks (CTB), told The STAR the reduction of the RRR would provide the industry with more loanable funds to support their lending activities to MSMEs and consumers that is vital as the economy begins to emerge from the lockdown.
“The reduction of the RRR by 100 basis points will substantially increase the lending capacity of thrift banks by billions of pesos. We firmly believe that the revival of MSMEs and consumers who are the core customers of thrift banks, will be a significant factor in the recovery of the economy post-enhanced community quarantine,” Felix said.
Felix added CTB members continue to lend to MSMEs and consumers, both new and renewals.
“They have gone beyond compliance with the law and BSP regulations and implemented various measures to encourage MSME lending and continue to nurture them, helping them to re-start their business or livelihood,” Felix said.
The BSP has adopted and implemented key prudential and monetary measures to mitigate the adverse impact of COVID-19, unleashing P1.3 trillion into the financial system
Source: https://www.philstar.com/business/2020/07/22/2029632/bsp-cuts-rrr-mid-sized-small-banks