BSP says reserve requirement reduction on the table, but no urgency

PANGLAO, Bohol — The Bangko Sentral ng Pilipinas (BSP) on Monday hinted at further reducing the reserve requirement ratio (RRR) for banks, but noted that there is no urgency and the timing would depend on market conditions.

BSP governor Eli Remolona Jr. said the RRR—the amount of cash from deposits that banks must keep on hand which they cannot lend out or invest to ensure they have enough money to meet liabilities—is already at a low level, but further cuts may come.

The RRR is currently set at 5.0% for universal and commercial banks and non-bank financial institutions with quasi-banking functions, at 2.5% for digital banks, and 0% for thrift banks.

The BSP in February delivered a 200-basis-point reduction, in line with projections earlier made by Remolona.

“The RRR is 5%. I would say it’s [reducing the rate] on the table, but there’s no urgency in adjusting it,” he told reporters in a press conference following the Central Banking Symposium.

“I think we can still reduce it, but the timing depends partly on how successful we are with normalizing liquidity in the market,” he said.

The BSP has maintained that changes in reserve requirements have a significant effect on money supply in the banking system, making them a powerful means of liquidity management.

Latest data available from the central bank show the domestic liquidity or the amount of money in the Philippine economy stood at P18.874 trillion in September, 7.3% higher than the P17.592 trillion in the same month last year. — BM, GMA Integrated News