Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said Monday there is no urgency to reduce banks’ reserve requirement ratio (RRR) at this time, although the option remains “on the table.”
The RRR for universal and commercial banks (UBs/KBs) and non-bank financial institutions with quasi-banking functions (NBQBs) currently stands at 5 percent. The BSP last cut the reserve requirement by 200 basis points in March.
“The reserve requirement is 5 percent. I would say it’s on the table, but there’s no urgency in adjusting it,” Remolona told reporters at a press conference following the Central Banking Symposium.
The RRR represents the percentage of bank deposits and deposit substitute liabilities that banks must set aside as funds, which cannot be loaned out. This requirement applies to peso liabilities of UBs/KBs, thrift banks, rural banks and cooperative banks and NBQBs.
Any adjustment to the RRR can significantly affect the money supply in the banking system, making it a crucial tool in the BSP’s liquidity management.
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