Banks’ Cash Reserves Trimmed by BSP to Spur Financial Growth

The Bangko Sentral ng Pilipinas (BSP) announced a reduction in the reserve requirement ratio (RRR) for banks, aimed at increasing liquidity in the domestic economy. Effective October 25, 2024, the RRR will be lowered by 250 basis points (bps) for universal and commercial banks (U/KBs) and non-bank financial institutions with quasi-banking functions (NBQBs). Digital banks will see a 200 bps reduction, while thrift banks (TBs) and rural/cooperative banks (RCBs) will have their RRRs cut by 100 bps.

This adjustment will bring the RRR to 7.0% for U/KBs and NBQBs, 4.0% for digital banks, 1.0% for TBs, and 0.0% for RCBs. The cuts apply to local currency deposits and deposit substitute liabilities of banks and NBQBs.

The BSP noted that the reductions are part of its ongoing efforts to reduce financial system distortions, lower intermediation costs, and promote more competitive pricing of financial services.