BSP announces another outsized RRR cut

Bangko Sentral ng Pilipinas

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) on Friday announced another jumbo reduction to bank reserve requirements, a move that would help create easier liquidity conditions in the economy as interest rates gradually fall.

Starting March 28, the reserve requirement ratio (RRR) for big banks will be reduced by 200 basis points to 5 percent, the BSP said in a statement.

At the same time, the RRR for digital banks will be trimmed by 150 bps to 2.5 percent. The reserve requirement for thrift banks will be removed following a 100-bp cut to their RRR.

BSP’s latest action would bring down the ratio of deposits that banks must set aside as standby funds, giving them more cash to lend at a time when the central bank is slowly cutting interest rates.

“The BSP reiterates its long-run goal of enabling banks to channel their funds more effectively toward productive loans and investments,” the central bank said.

“Reducing RRRs will lessen frictions that hinder financial intermediation,” it added.