The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday reduced again the reserve requirement ratios of universal and thrift banks by 100 basis points effective the first week of December to unleash more liquidity into the financial market.
The board complemented the move with a reduction in RRR for non-bank financial institutions with quasi-banking functions. It will be effective on the first day of the first reserve week of December 2019.
“The reduction in reserve requirements will apply to the deposits and deposit substitute liabilities in local currency of banks and non-bank financial institutions with quasi-banking functions,” it said.
The RRR for universal and commercial banks was cut to 14 percent from 15 percent while the RRR for thrift banks was slashed to 4 percent from 5 percent.
“The reserve requirement reduction is in line with the BSP’s broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs,” the board said.
The adjustment in RRR aims to ensure there is sufficient domestic liquidity in support of economic activity, the BSP said.
Reserve requirement is a central bank regulation that sets the minimum fraction of customer deposits and notes that each bank should hold as reserves.
The Monetary Board on Sept. 27 also cut the RRR of all banks by 100 basis points effective the first week of November. The reduction came a day after it reduced the benchmark policy rates by another 25 bps to 4 percent, amid the continued slowdown in consumer prices.
Economists earlier said the cuts would be “positive for both the Philippine economy and financial markets, in terms of greater economic activities/faster GDP growth.”
BSP Governor Benjamino Diokno earlier said he was aiming for a single-digit level of RRR within his term.