Bangko Sentral OKs 1% bank reserve cut

The central bank on Friday announced another round of monetary policy easing—this time via a one-percentage point reduction in banks’ reserve requirements—just a day after it reduced its key benchmark rate.

In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said universal and commercial banks would be mandated to keep 15 percent of their deposits as liquid reserves starting on the first day of the first reserve week of November 2019.

This represents a 100-basis point reduction from the existing reserve requirement ratio level of 16 percent and is expected to release almost P100 billion in liquidity into the domestic economy—a move that will help pump prime gross domestic product growth after a lackluster performance in the first semester.

During the Monetary Board’s meeting on Friday, the policy-making body of the central bank also mandated that the reserve requirement for thrift banks be reduced by the same amount to 5 percent from the prevailing 6 percent. Meanwhile, rural banks will also see their reserve requirement fall to 3 percent from the existing 4 percent in November.