The Bangko Sentral ng Pilipinas (BSP) is weighing a substantial reduction in the reserve requirement ratio (RRR) for banks, potentially slashing it from the current 9.5% to 5%, Governor Eli Remolona said in a Bloomberg TV interview.
“We can reduce it to five percent,” Remolona said, noting that this would still be one of the highest RRRs in the region. However, he emphasized that the timing of such a move is crucial and it is unlikely to happen while the BSP maintains a hawkish monetary policy stance.
“Timing is important,” Remolona said. “My sense is it won’t be during the same monetary policy meeting, but we would like to reduce the reserve requirement significantly because I think it’s distorting financial intermediation.”
This approach aligns with Remolona’s earlier comments, suggesting a possible RRR reduction to 5% during his tenure.
The BSP recently adopted a tiered approach to lowering the RRR, with more significant cuts for smaller banks.
The RRR for universal and commercial banks and non-banks with quasi-banking functions was reduced to 9.5% from 12%, while digital banks saw a reduction to 6% from 8%. Thrift banks had their RRR lowered to 2% from 3%, and rural and cooperative banks now have an RRR of 1%.
