BSP reduces reserve requirement by 1%

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday slightly reduced on the reserve requirement ratio (RRR), in line with the central bank's shift to a market-based monetary policy.

In an emailed statement, the BSP said it lowered the RRR—the amount of cash of a bank must hold in its reserves against deposits made by customers—by 1 percentage point to 19 percent from the current 20-percent requirement.

BSP Governor Nestor Espenilla, Jr. last year said he wants to cut the RRR by as much as 50 percent as it remains one of the highest in the world.

"In deciding to reduce the reserve requirement ratios, the Monetary Board reaffirms the BSP's commitment to gradually lessen its reliance on reserve requirements for managing liquidity in the financial system," the BSP said.

According to the central bank, the reduction in the RRR will take effect on the reserve week starting March 2, 2018.

"The Monetary Board believes that the BSP has attained sufficient progress in its shift towards the use of market-based monetary instruments since the adoption of the interest rate corridor framework in June 2016," it said.

"[T]he reduction in reserve requirements will help mobilize liquidity in support of economic activity as well as capital market development over the medium term," it added. — BM, GMA News