By Luz Wendy T. Noble, Reporter

THERE is still room to reduce the reserve requirement ratio (RRR) of big banks to achieve the Bangko Sentral ng Pilipinas’ (BSP) goal to bring this down to a single digit by 2023, officials said.

“Further adjustments on the RRR remain on the table, depending on domestic liquidity and recovery in credit demand in the coming months,” BSP Deputy Governor Francisco G. Dakila, Jr. said in at online briefing on Dec. 16.

It was in 2020 when the central bank last reduced the RRR of lenders — by 200 basis points for big banks in April and another 100 bps for thrift and rural banks in July.

The RRR for big banks is currently at 12%, one of the highest in the region. Reserve requirements for thrift and rural lenders are at 3% and 2%, respectively.

“The gradual buildup in the volume of issuance of BSP securities will also support efforts to align RR ratios with the region by allowing liquidity absorption using auction-based monetary operations,” Mr. Dakila said.

The central bank has started offering BSP securities in September 2020. The one-month bills, together with the term deposits, are the central bank’s tools used to mop up excess liquidity in the financial system and guide market interest rates.

BSP Governor Benjamin E. Diokno said the central bank has already infused liquidity worth more than P2 trillion into the financial system through these measures during the pandemic.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the next RRR cut may be done when there is already stable growth, which may be seen by the second half of 2022.

“As activities strengthen, domestic liquidity could slowly get sapped enabling BSP to cut RRR to support easing liquidity,” Mr. Roces said in a Viber message.

UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the central bank will consider the financial system’s need for liquidity and macroeconomic recovery in determining the timing for the next RRR cut.

“If fourth-quarter gross domestic product comes out better than expected, we may expect the RRR cut sooner rather than later,” Mr. Asuncion said in a Viber message.

Prior to the pandemic, Mr. Diokno vowed they will slash the RRR to a single digit to make the reserve requirements for the local banking industry at par with its regional neighbors.