BSP may expand coverage of reserve requirement


The Bangko Sentral ng Pilipinas said it was considering expanding the coverage of the reserve requirement imposed on banks to include funds managed by their trust departments.

At present, only deposits and deposit substitutes are covered by the reserve requirement.

The reserve requirement is one of the tools used by the BSP to manage liquidity in the economy. It is the proportion of deposits placed in banks that must be kept with the BSP as reserves. The rate is currently set at 18 percent.

According to BSP Deputy Governor Diwa Guinigundo, the BSP found it prudent to amend some of the regulations on liquidity management for streamlining and alignment with international standards.

“We are trying to work on how to rationalize the reserve requirement. [Expanding the coverage of the reserve requirement] is another policy reform we are looking at, but it is still under further study,” Guinigundo said.

In other countries, he said the reserve requirement imposed by central banks covered funds managed by trust departments.

On Thursday, BSP Governor Amando Tetangco Jr. said the central bank had the flexibility to amend the regulatory environment given the healthy pace of growth of the economy and the benign inflation environment.

This means the impact of any regulatory adjustments is not expected to cause a significant slowdown in the economy or a worrisome inflation because economic growth has been solid and inflation modest.

“Our recent calculations show that the country’s potential output has also been expanding in line with improvements in capital formation and levels of employment. This gives us more degree of freedom to adjust our market operations and institute macro-prudential tools as appropriate to ensure that volatilities in financial markets do not translate into excesses in other sectors of the economy,” Tetangco said.

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  • Ben

    This country must unleash the PPP infrastructures while speculative money continues to pour in, excess reserve will not help this country if not put into good use it will just be prone to speculation. These $83 billion GIR idle money and growing in the central bank`s vault will surely cause our peso`s ascent and our country`s economic pillar will not be able to sustain this when we are just relying heavily in export, OFWs remittance and BPO and all are soon going to contract sooner or later if we can`t keep our peso at the right peso exchange range and generating more jobs and growing middle income earners to absorb this. The government must unload its dollar deposit from the CB and put it into PPP use and at the same time pre-pay the debt in order to lower the CB holdings to a level it will lessen the pressure on our peso. This speculative money isn`t really creating jobs when it is only idled in the central bank`s vault. The ideal reserve should only be at least three months to six months worth of import and the rest should be spent for expanding the economy through jobs, factories, renewable power plants and high speed transportation, flood mitigation, fuel supply, R&D infrastructures..

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