Bangko Sentral cuts banks’ reserve requirement ratio by 250 bps to 9.5%

By Julito G. Rada

THE Bangko Sentral ng Pilipinas on Thursday reduced the reserve requirement ratio of universal and commercial banks by 250 basis points to free up more funds.

It also brought down the RRR of nonbank financial institutions with quasibanking functions by 250 bps, of digital banks by 200 bps and of thrift banks, rural banks and cooperative banks by 100 bps.

RRR refers to the minimum reserves required for depository institutions. A change in the minimum reserve ratio affects the deposit base a financial institution can lend out.

The BSP said the reduction would bring the RRRs of universal and commercial banks and NBQBs from 12 percent to 9.5 percent; those of digital banks from 8 percent to 6 percent; thrift banks from 3 percent to 2 percent; and rural and cooperative banks from 2 percent to 1 percent.

The new ratios will take effect on the reserve week beginning June 30, 2023 and will apply to the local currency deposits and deposit substitute liabilities of banks and NBQBs.

“The reduction in reserve ratios is intended to coincide with the expiration of alternative modes of compliance with reserve requirements by end-June 2023 and thereby ensure stable domestic liquidity and credit conditions,” the

BSP said.

“This operational adjustment is in line with the BSP’s ongoing efforts towards a more active and flexible approach to liquidity management through marketbased monetary operations. This includes the inaugural offering on June 30, 2023 of the 56-day BSP Bill, which serves as an additional instrument for absorbing system liquidity,” it said.

The BSP clarified that the lower reserve requirements do not constitute any shift in monetary policy settings. “The BSP continues to prioritize bringing inflation back towards a target-consistent path over the medium term and will continue to signal its monetary policy stance through the key policy interest rate, or the rate on the overnight reverse repurchase facility,” it said.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said

DBP offers to assist water districts, utilities the latest RRR cut would infuse about P325 billion into the financial system, or about P130 billion for every 1-percentage-point reduction for large banks.

Ricafort said “more peso supply will be infused into the market; more peso could be used for lending activities; purchases of government securities/other fixed income investments, equities/stocks, forex, property, other investments/assets, other spending/ consumption, other business/economic activities, among others.”

He said this could be siphoned off with the upcoming 56-day BSP bills starting June 30, 2023 to help stabilize the exchange rate and overall inflation.

“The RRR cut is also fulfilling the promise/target a few months/years ago to bring down the large banks’ RRR to single digit levels by the end of the BSP Governor’s term on June 30, 2023,” Ricafort said.

STATE-RUN Development of the Bank of the Philippines offered to provide credit assistance to water districts, local government units and water utility firms to expand production capacity and explore additional water sources amid the looming onset of El Niño phenomenon at the latter part of the year, a top executive said Thursday.

DBP president and chief executive Michael de Jesus said the funding assistance would be channeled under its pioneering Water for Every Resident program, which was designed to support projects that would provide affordable water supply at the community level.

“DBP’s broad experience in bankrolling water supply projects would be a boon to our collective efforts to find suitable and sustainable solutions to address the rising demand for an important natural resource such as water,” de Jesus said.

DBP is the eighth largest bank in the country in terms of assets and provides credit support to four strategic sectors of the economy – infrastructure and logistics; micro, small and medium enterprises; the environment; and social services and community development.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration earlier raised an El Niño alert, which it expects to emerge by June and persist until the first quarter of 2024. Julito G. Rada

Quirino Mabini for the 2nd Tour de McDo in celebration of World Bicycle Day. The latest ride brought together several cycling communities and personalities simultaneously in three key areas across the country – Pampanga, Intramuros and Tagaytay. Tour de McDo is a multiple-stage bike challenge introduced under McDonald’s Green and Good campaign – the QSR giant’s initiative to do better for the environment by implementing sustainable and alternative solutions in their restaurants and operations.