Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the central bank was in no rush to lower banks’ cash requirements, a move that could have freed up more funds for lending at a time of sluggish economic growth, citing the need to carefully manage domestic liquidity.
‘It’s on the table,’ Remolona told reporters at a news conference on Monday following a BSP forum in Bohol. ‘But there’s no urgency in adjusting it.’
Last March, the BSP further reduced the reserve requirement ratio (RRR) for big banks to 5 percent, 2.5 percent for digital banks and zero for thrift banks.
The RRR refers to the certain amount of deposits that banks must set aside as standby funds, which do not generate returns because they cannot be used for lending activities. This is to ensure that lenders are able to meet their liabilities in case of sudden withdrawals.
‘Neutral’ move
When Remolona took office as central bank governor in 2023, the RRR stood at 9.5 percent. He signaled then that the ratio should come down, even raising the possibility of bringing it to zero over his term.
Unlike interest-rate cuts, which can weigh on the peso, the BSP chief had previously described the lowering of the reserve ratio as a ‘neutral’ move that injects liquidity into the financial system and frees up more funds for lending.
That could potentially provide some relief for an economy that slowed to a four-year low of 4 percent growth in the third quarter, as a widening graft scandal saps business and consumer confidence