BSP needs more data to tweak the reserve requirement

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THE central bank said Wednesday it will need more indicators besides the continued oversubscription on its term deposit facility (TDF) before deciding to adjust the reserve requirement ratio (RRR) of banks.

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Wednesday’s P110 billion TDF auction by the Bangko Sentral ng Pilipinas (BSP) continued to be oversubscribed, with total tenders reaching over P222 billion, indicating sustained interest in the facility.

The BSP awarded P10 billion of the seven-day TDF 2.50 percent and P100 billion of the 28-day tenor at 2.55 percent.

Bids for the seven-day TDF reached P35.28 billion, and P187.48 billion for the 28-day tenor.

Monetary authorities would need more data points from the TDF auction results before adjusting the reserve requirement, BSP Governor Amando Tetangco Jr. said.

“While these are important, the TDF results are not the only factor to consider for a change in the RR,” he told reporters in a text message.

The RRR is the proportion of current deposits that banks must keep with the BSP, against the sum that they can use for lending.

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.

Latest BSP data showed that the country’s money supply expanded by 11.8 percent year-on-year to P8.7 trillion in August.

Tetangco said the inflation outlook, and any brewing pressure on other segments of the financial markets, are some of the other factors that must be considered in adjusting the RRR.

“There is no black box for this. We will make the necessary announcement when we believe the confluence of conditions warrant a move,” he said.

“The objective however remains—that we want to be more market-oriented in our policy tools. It is just a matter of timing,” he added.

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