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BSP to ‘pre-announce’ action on banks’ reserve requirement

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Bank Vault

THE BANGKO SENTRAL ng Pilipinas (BSP) will “pre-announce on a quarterly basis” its intention on banks’ reserve requirement ratio (RRR) in order to prepare markets, BSP Governor Benjamin E. Diokno said on Tuesday.

“The consensus of Monetary Board (MB) members is we will pre-announce on a quarterly basis,” Mr. Diokno said on the sidelines of an event in Quezon City when asked on succeeding reductions in banks’ RRR.

Hindi naman ‘yung sasabihin ko na for the next three years eto ’yung five percent [cut] every quarter. Walang ganon. Quarterly… We will pre-announce kung anong gusto namin (We will not say that we will cut the RRR by five percent every quarter for the next three years. It’s not like that. We will pre-announce quarterly what we intend to do)” he said.

“We will pre-announce it para hindi nagugulat. Na-appreciate naman nila ‘yun, ‘di ba? Para mawala na rin ‘yung… everyday na lang nag-e-speculate (We will pre-announce it so that the market will not be caught off-guard. They appreciate that, don’t they? So that we can minimize market speculation),” said the central bank chief, who sits as the chairman of the policy-setting Monetary Board.

Meron pa kaming six weeks eh. Puwede ring hindi, puwedeng at the end, puedeng hindi at the end. Depende (We still have six weeks until the Monetary Board’s Sept. 26 policy review. We might not cut the RRR, we might do so at the end of the six weeks, we might not cut at the end. It depends).”

In non-interest rate-setting meetings last May, the MB implemented a multi-phased 200 basis point reduction in RRR to 16% for big banks and to six percent for thrift banks by the end of July.




The central bank chief has committed to paring the RRR down to single-digit level when he ends his term — the remainder of the six-year term of the late BSP Governor Nestor A. Espenilla, Jr., who died last Feb. 23 — in July 2023.

Mr. Diokno said that RRR reduction is a “live issue” in MB meetings “in the sense that we can take it up anytime.”

“’Di ba kakatapos lang ng July, may August pa tayo (July has just ended, we still have August), so… we just look at how it (freed-up funds) was used… liquidity constraints and then we’ll consider other proposals,” he said.

The timing of RRR cut, Mr. Diokno has said, will still depend on liquidity, as the BSP watches if reductions earlier this year — which are estimated to have released more than P200 billion into the system — spurred lending to productive economic activities.

The central bank announced on July 31 that money supply growth steadied at 6.4% year-on-year to about P11.78 trillion in June — and edged up by about 0.3% month-on-month — even as it trimmed lenders’ RRR, the last phase of which took effect on July 26.

Mr. Diokno said late last week that another RRR cut could take place “next month”, adding that it could be decided in any of the Monetary Board’s weekly meetings.

He had also said that another 25 bp cut in benchmark interest rates could be on the table during the Sept. 26 policy review, which will be the sixth for this year. — Mark T. Amoguis

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