BSP cuts TBs, RBs, Coop Banks' RRR

By Joann Villanueva

May 23, 2019, 9:04 pm

MANILA – Philippine monetary officials on Thursday cut mid-sized and small banks’ reserve requirement ratio (RRR), a week after cutting universal and commercial banks’ (U/KB) RRR.

“This morning, the Monetary Board decided to cut the RRR for thrift, savings and cooperative banks,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told journalists in a phone message.

Specifically, RRR of thrift banks (TBs) was trimmed down by 200 basis points (bps) from eight percent to six percent and these will be implemented on staggered basis just like on the U/KBs.

Effective May 31, 2019, TBs RRR will be reduced by 100 bps while 50 bps each will be slashed on June 28, 2019 and July 26, 2019, respectively.

“For rural and cooperative banks, the RRR was cut by 100 bps, from 5 percent to 4 percent, effective 31 May 2019. The BSP will issue the necessary circular shortly,” Diokno added.

These cuts are in line with the central bank’s bid to lower RRR in the country, which to date is among the highest in the region.

Former BSP Governor Nestor A. Espenilla Jr., who succumbed to cancer last February, vowed to bring the RRR level to single digit by the end if his term in 2023.

This bid is also in line with the goal to make monetary policy more market-based, he said.

Earlier, Rizal Commercial Banking Corporation (RCBC) Economics & Industry Research Division head Michael L. Ricafort said a one percent cut in TBs, RBs, and Coop Banks’ RRR is expected to release at least PHP11 billion into the system.

Relatively, the 200 bps reduction in U/KBs’ RRR is expected to infuse about PHP190 billion.

“Thus, the overall additional peso liquidity to be infused into the local financial system from any combined RRR cuts for all banks worth a total of at least +PHP200 billion would be positive for both the Philippine economy and financial markets, in terms of greater economic activities/faster GDP (gross domestic product) growth,” he added. (PNA)