BSP says no more reserve requirement cuts for 2018

The Bangko Sentral ng Pilipinas (BSP) on Thursday said it will keep the present reserve requirement ratios for the rest of the year, buy may resume in 2019.

“We’ve done enough with 200 bps in total RRR cuts this year in line with the strategy to implement the important financial sector reform over the medium-term in a gradual and phased manner,” BSP Governor Nestor Espenilla, Jr. said in a text message to reporters.

The policy-setting Monetary Board (MB) has so far reduced the RRR by 200 basis points or 2 percentage points at the rate of 1 percentage point each in March and in June.

“Cutting RRR by 200 bps this year already sends a credible and concrete signal to the financial system of the BSP’s commitment to structural reforms so the industry can be guided accordingly in developing their long-term strategic plans,” Espenilla said.

RRR is the amount of cash a bank must keep as reserves against deposits made by customers, with the Philippines’ 18 percent currently one of the highest reserve requirement rations in the world.

Last year, Espenilla said he wants to slash the RRR to single-digit levels but that the central bank is wary of the timing to ensure that the financial system will be able to absorb a liquidity surge.

“This initiative can resume next year just as inflation returns to target based on our forecast,” he said.

“The goal of achieving single-digit RRR by the end of my term is therefore quite attainable without sacrificing monetary control,” he said.

During a Monetary Board meeting, the central bank said it expects inflation to hit 4.5 percent this year and taper off to meet the 2- to 4-percent target range in 2019. —VDS, GMA News