Bank lending will continue to grow at a healthy double-digit pace even after the Bangko Sentral ng Pilipinas increased the reserve requirement for banks.
According to Ma. Cyd Tuaño-Amador, BSP assistant governor, the hike in the reserve requirement will simply prevent a sharper rise in lending activities and keep the economy from overheating.
The higher reserve requirement was not meant to temper the pace of credit growth currently being seen, Amador said.
Latest lending data from the BSP showed that credit from universal and commercial banks expanded by 18.8 percent as of end-May. During the period, their outstanding loans rose to P2.54 trillion from the P2.14 trillion seen last year.
The pace of credit expansion in May was the fastest in over three years or since April 2009.
“We don’t think the increase in the reserve requirement would temper credit growth. [Rather], it is something that will prevent potential overheating of the financial market and thus support growth over the long run,” Amador told reporters.
The reserve requirement determines the proportion of deposits in banks that these institutions must keep in reserve with the BSP. This requirement is one of the tools used by the central bank to manage the amount of liquidity in the economy, and thus control inflation.
Last Thursday, the central bank raised the reserve requirement anew by a percentage point, or from 20 to 21 percent.
In June, the BSP also raised the requirement from 19 to 20 percent.
The latest increase in the reserve requirement, effective Aug. 5, will siphon off an estimated P30 billion from the banking system, Amador said.
This is on top of the reported P38 billion taken off circulation after the BSP hiked the reserve requirement in June.