Bangko Sentral cuts banks' reserve requirement anew to support growth

GROWTH. The Philippine central bank slashes the reserve requirement ratio to support economic growth. Rappler file photo

GROWTH. The Philippine central bank slashes the reserve requirement ratio to support economic growth.

Rappler file photo

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) trims anew the amount banks need to hold in their reserves, as the Philippines is poised to miss economic growth targets this year like the rest of the world.

The BSP said on Thursday, October 24, that it will be slashing the reserve requirement ratio (RRR) for commercial and thrift banks by 100 basis points starting December.

RRR for commercial banks will be down to 14%, while thrift banks will have just 4%.

Reducing the RRR by 1 percentage point lets out some P100 billion in the financial system, encouraging spending and economic growth.

"The reserve requirement reduction is in line with the BSP's broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs," the BSP said.

"At the same time, the adjustment in reserve requirement ratios is aimed to ensure sufficient domestic liquidity in support of economic activity," it added.

Multilateral lenders have all projected that the Philippines’ gross domestic product for 2019 will be lower than 6%, below the target of the government, due to global trade tensions. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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