Bangko Sentral ng Pilipinas (BSP). RYAN LEAGOGO/INQUIRER.net FILE PHOTO
MANILA, Philippines — The central bank on Thursday moved to release more liquidity into the Philippine financial system amid an environment of declining inflation and lower economic growth in the first quarter of 2019.
In a message to the press, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the amount of cash banks are required to immobilize in their vaults will be reduced by 200 basis points in three stages over the next three months.
“The Monetary Board decided to reduce the reserve requirement ratio from 18 percent to 16 percent,” he said via SMS.
Once complete, the reduction in bank reserves will release as much as P200 billion into the domestic economy – funds that financial institutions will lend out to public and private borrowers which, in turn, will be used for productive activities.
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The first adjustment will be a 100-basis point reduction effective May 31, to be followed by a 50-basis point cut on June 28, and a final 50-basis point reduction on July 26, 2019.
“This new policy will apply to universal and commercial banks only,” Diokno said, adding that any adjustment in the reserve requirements of smaller financial institutions “will be considered in the next Monetary Board meeting.”
