Bangko Sentral cuts reserve requirement anew

The Monetary Board (MB) has reduced the reserve requirement ratio (RRR) of banks by one percentage point, the second reduction so far this year, the Bangko Sentral ng Pilipinas (BSP) reported Thursday.

In a statement, the BSP said the MB decided to cut down the RRR of banks by 1 percentage point to 18 percent effective June 1, from the current 19 percent.

The RRR is the amount of cash a bank must hold in its reserves against deposits made by customers. The Philippines currently has one of the highest across the globe.

The BSP in March this year cut down the RRR by 1 percentage point from the then 20-percent RRR.

"These operational adjustments are part of the BSP's shift toward a more market-based implementation of monetary policy that aims to gradually reduce the BSP's reliance on reserve requirements for managing liquidity in the financial system," the BSP said.

"The reduction in reserve requirements is also part of the BSP's broad financial sector reform agenda to promote a more efficient financial system by lowering intermediation costs," it added.

BSP Governor Nestor Espenilla in October 2017 said he wants to cut down the RRR by 50 percent, which he then said could be down as debt instruments increase and more securities are being issued. —Jon Viktor D. Cabuenas/KBK, GMA News