SMALL BANKS continued to lend to micro, small, and medium enterprises (MSMEs) and eligible large enterprises (LEs) as part of their alternative compliance with reserve requirements, the Bangko Sentral ng Pilipinas (BSP) said in a report.

“For the reserve week ending 27 July 2023, TBs (thrift banks) and RCBs (rural and cooperative banks) allocated an aggregate of P13.3 billion and P6.5 million loans to MSMEs and LEs, respectively, for compliance with the reserve requirements. These accounted for 1% and 0.0005% of total required reserves for the said reserve week,” the central bank said in a report on recent trends in the Philippine financial system.

During the coronavirus pandemic, the central bank allowed banks to count their loans to MSMEs and pandemic-hit LEs as part of their compliance with reserve requirements.

The relief measure expired on June 30. However, small lenders can still count their loans to MSMEs and LEs as alternative compliance with reserve requirements until they are fully paid, but not later than Dec. 31, 2025.

“The unwinding was set to coincide with the reduction in the reserve requirement ratios by 30 June 2023 to facilitate the transition, supporting the banks’ continued compliance with the reserve requirement and managing friction costs related to the policy adjustment,” the BSP said. 

In June, the BSP cut the reserve requirement ratios of big banks by 250 basis points (bps) to 9.5%, by 200 bps to 6% for digital banks, and by 100 bps for thrift banks, and rural and cooperative banks to 2% and 1%, respectively.

In 2022, banks lent P493.5 billion to MSMEs as alternative compliance with reserve requirements. This was 6.6% higher than the P463.1 billion a year prior.

By banking group, universal and commercial banks extended P390.9 billion in loans to MSMEs, while rural and cooperative banks lent P52.7 billion. — KBT