The Bangko Sentral ng Pilipinas said Wednesday it will begin to unwind the temporary regulatory relief measure allowing banks to utilize peso-denominated loans to micro-, small- and medium- enterprises and large enterprises impacted by the pandemic.
The measure served as alternative compliance with the reserve requirements.
It said in a statement the unwinding of the relief measure would coincide with the reduction in the reserve requirement ratios by June 30, 2023 to facilitate the transition, supporting the banks’ continued compliance with the RR and managing friction costs related to the policy adjustment.
“Starting 01 July 2023, universal and commercial banks shall no longer be allowed to use MSME and LE loans as alternative compliance with the RR,” it said.
Meanwhile, thrift, rural and cooperative banks will be allowed to utilize their outstanding MSME and large enterprises’ loans as of June 30, 2023 as alternative mode of compliance with the RR until such loans are fully paid, but not later than Dec.31, 2025.
“The outstanding MSME and LE loans of thrift, rural and cooperative banks that subsequently become past due or non-performing, or are extended, renewed, or restructured, shall no longer be eligible as alternative compliance with the RR,” it said.
Likewise, new MSME and large enterprises loans that are granted by banks after the expiry of the relief measure shall not be eligible as alternative compliance with the RR,” it said.
“The unwinding of the temporary relief measure will restore the use of the RR as an instrument for managing liquidity in the financial system in line with the BSP’s broader agenda of enhancing its liquidity management capabilities,” it said.
It will also simplify the administration of banks’ compliance with the RR.
The BSP announced early this month the cut in the RR ratios of banks by 250 basis points or 2.5 percent for universal and commercial banks and non-bank financial institutions with quasi-banking functions or NBQBs, 200 bps or 2 percent for digital banks and by 100 bps or 1 percent for thrift banks, rural banks, and cooperative banks.
The reduction will bring the RRRs of universal and commercial banks and NBQBs from 12 percent to 9.5 percent: digital banks from 8 percent to 6.0 percent; thrift banks from 3 percent to 2 percent,l; and rural and cooperative banks from 2 percent to 1 percent.