Lenders back BSP plan to slash reserve ratio

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LEADING LENDERS have expressed their support on central bank’s plan to reduce the reserve requirement ratio (RRR), saying this will release more liquidity into the market, giving them more cash to use in their core businesses.

In a statement, BDO Unibank, Inc. Treasurer Pedro M. Florecio III said the lowered RRR will improve the lending capacity of the banks.

“Lowering the RRR will allow banks to boost its lending capacity providing a continuous supply of credit for consumers and businesses,” Mr. Florecio said, adding that it will open more opportunities for banks to reach to out to more clients and enhance financial inclusion.

Meanwhile, Bank of the Philippine Islands Treasurer Antonio V. Paner addressed the uncertainties on the inflationary effects the RRR decrease might bring.

“At the current condition, there will be minimal inflationary effect because the reduced cost of funds will help reduce cost push inflation,” Mr. Paner noted.

“We are confident that the BSP (Bangko Sentral ng Pilipinas) is equipped to manage the impact on price changes as there are other monetary tools that can be used.”

In October, BSP Governor Nestor A. Espenilla, Jr. said the regulator plans to gradually reduce the RRR of big banks from the current 20% to a single-digit level, adding that this will inject around P700 billion of idle cash in the medium term.

The move received a nod from the International Monetary Fund, with the agency noting that this should be done gradually and be driven by data to avoid sending too much liquidity in the economy.

The reserve requirement ratio is the amount of depositors’ balances the banks need to keep with the BSP in the form of cash and other liquid assets. The 20% RRR for big banks is considered to be one of the highest in the region. — KANV