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.
Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City,Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94