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Philippine central bank makes further cuts to reserve requirement ratio

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Philippine central bank makes further cuts to reserve requirement ratio

The Philippine central bank cut the reserve requirement ratio for the second time by 1 percentage point since Governor Nestor Espenilla Jr. unveiled plans to gradually lower the ratio to single-digit levels.

Bangko Sentral ng Pilipinas said May 24 that it will reduce the reserve requirement ratio to 18% from 19%, effective June 1, as part of a broad midterm plan to reform the financial market and encourage a more efficient sector by lowering intermediation costs.

The ratio will apply to the liabilities of banks and nonbank financial institutions with quasi-banking functions that are subject to a reserve requirement of 19%.

The central bank said the gradual cuts in the reserve requirement ratio that started in March 2018 are part of efforts to reduce its dependence on reserve requirements for managing liquidity in the financial system. The regulator added that the calibrated reductions are not meant to signal changes in monetary policy.