The country’s biggest lenders have welcomed the reduction of bank reserve requirements, saying this would ultimately benefit consumers.
“The reserve adjustment means that borrowers will have access to more sources of funds and more efficient cost of borrowing that is expected to propel more economic activity in the country,” the Bankers Association of the Philippines (BAP) said in a statement on Friday.
The Monetary Board on Thursday approved a one-percentage point “operational adjustment to support the BSP’s (Bangko Sentral ng Pilipinas) shift toward a more market-based implementation of monetary policy as well as its broad financial market reform agenda.”
Effective March 2, 2018, the reduction will apply to all banks and non-bank financial institutions with quasi-banking functions that are currently required to comply with a 20-percent reserve requirement ratio (RRR).
The RRR is the proportion of current deposits that banks need to keep with the central bank against the sum they can loan out to borrowers.
BAP Managing Director Benjamin Castillo said the organization’s member banks were expected to be able to immediately extend additional credit to consumers and enterprises.
“[T] move of the Monetary Board for the gradual reduction in the reserve ratio … clearly demonstrates a strong regulatory framework and supports the BSP’s ability to further manage liquidity while policy rates are within its framework to continuously promote economic growth,” BAP said.
The BAP is the lead organization of universal and commercial banks in the country.