Thrift lenders push for lower reserve ratio to boost lending to small businesses

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The Chamber of Thrift Banks (CTB) is pushing for a lower reserve requirement ratio (RRR) to help encourage lending to embattled small businesses.

“We are still pushing for a reduction in thrift banks’ regulatory reserve requirement from four percent to three percent since a one percent decrease will mean additional billions of pesos in liquidity which thrift banks can provide borrowers with access to credit with longer term and at reasonable rates particularly during these times,” CTB President Cecilio D. San Pedro said during the group’s virtual General Membership Meeting on Tuesday.

The central bank slashed the RRR of universal and commercial banks by 200 bps to 12% in a bid to boost liquidity during the lockdown. However, the reserve requirement ratios of thrift and rural banks were maintained at four percent and three percent, respectively.

The Monetary Board has authorized Mr. Diokno to cut banks’ RRR by up to 400 bps this year.

The BSP also reduced the minimum liquidity ratio (MLR) of standalone thrift, rural and cooperative banks to 16% from 20% in April. Mr. San Pedro said the relief measure is a welcome development for their industry.

“With the reduced MLR… the resulting increase for thrift banks may be used to foster greater financial inclusion for its main target market — the MSMEs (micro, small, and medium-sized enterprises) and the consumer sector,” he said.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday that the option to cut RRR is still on the table, noting they are monitoring the liquidity in the financial system.

BSP data showed domestic liquidity or M3, the broadest measure of money supply in an economy, grew 16.2% year on year to P13.6 trillion in April, faster than the 13.3% pace in March.

However, outstanding loans disbursed by universal and commercial banks rose at a slower pace of 12.7% that month from the 13.6% seen in March.

Mr. San Pedro said the CTB has been working with the Japan International Cooperation Agency (JICA) in developing a credit risk database eyed to enhance lenders’ credit assessment capacity, foster a transparent scoring model and promote financial intermediation among MSMEs.

“The Monetary Board approved the role of BSP as a responsible agency for this credit database project,” he said. — LWTN