• BSP may adjust banks’ RRR


    THE central bank said Wednesday it may consider an adjustment in the reserve requirement ratio (RRR) of banks if more domestic liquidity continues to migrate to its term deposit facility (TDF).

    Tuesday’s P90 billion TDF auction by the Bangko Sentral ng Pilipinas (BSP) continued to be oversubscribed, with total tenders reaching nearly P195 billion, indicating sustained interest in the facility.

    “The results of the auction today are not unexpected,” BSP Governor Amando Tetangco told reporters in a text message.

    Given the results, Tetangco said there is room to further increase the auction size going forward so that more funds could migrate from the overnight deposit facility to the TDF.

    “An adjustment in the RRR can be considered down the road when, among others, more funds have migrated to the TDF and if credit conditions warrant,” he added.

    In Wednesday’s auction, the BSP awarded P10 billion for the seven-day TDF and P80 billion for the 28-day tenor, with yields of 2.50 percent for the seven-day TDF and 2.521 percent for the 28-day tenor.

    Bids tendered for the seven-day TDF reached P33.31 billion and those for the 28-day tenor hit P162.64 billion.

    “I think there is no surprise in what the BSP is saying. It is still in line with the central bank’s current plan,” Gundy Cahyadi, economist at Singapore-based DBS, said.

    “Adjustment in the RRR is indeed likely to follow once the central bank steps up the TDF issuance,” he added.
    The RRR is the proportion of current deposits that banks need to keep with the BSP, against the sum that they can loan out to borrowers.

    Since May last year, the BSP has maintained the RRR of banks at 20 percent to prevent a rapid rise in liquidity and credit expansion, which could threaten the stability of the country’s financial system if left unchecked.
    Latest BSP data showed that the country’s money supply expanded 13.1 percent year-on-year in July to P8.8 trillion.


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