Bangko Sentral ng Pilipinas (BSP) said on Friday, September 20, that it would reduce the reserve requirement ratio (RRR) for large banks by 250 basis points next month to inject more liquidity into the domestic economy.
In a statement, BSP said that it will lower the reserve ratios for universal and commercial banks to 7 percent effective October 25, down from the current 9.5 percent.
Digital banks will see a 200 basis point reduction in their RRR, bringing it to 4 percent.
Additionally, thrift banks, rural banks, and cooperative banks will have their reserve ratios cut by 100 basis points.
“The BSP emphasizes that these adjustments in reserve requirements are in line with its continuing efforts to reduce distortions in the financial system. The reductions will lower intermediation costs and promote better pricing for financial services,” BSP said.
“As inflation continues to track a target-consistent path over the next two years, the BSP will reassess the need for further reductions in the RRRs to better align them with regional norms over the medium term,” it added.
In a separate commentary, Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said the latest RRR cut will help lower intermediation costs by banks and would be passed on in terms of lower loans/lending rates.
He added that the cut would increase demand for loans/credit and would boost economic growth, as part of monetary easing measures, as inflation remains well anchored with the central bank’s target.
“There would be more pesos that could be invested in the financial markets such as bonds and other fixed income investments, stocks, currency, property/real estate, among others that would help support price gains than otherwise,” Ricafort said in a Viber message. (TCSP)
