BPI Proposes Conditional RRR Cut to Lower Interbank Transfer Fees

BPI President and CEO Jose Teodoro “TG” Limcaoco has proposed a conditional reduction in the reserve requirement ratio (RRR) for large banks, suggesting that this could lead to a significant decrease or even elimination of interbank transfer fees. Limcaoco argued that if the Bangko Sentral ng Pilipinas (BSP) were to offer such a conditional cut, banks would have more liquidity to lend, which could offset the costs associated with providing free transfers.

Currently, the RRR for universal and commercial banks is set at 9.5%, with different rates for other banking institutions. Limcaoco emphasized that a conditional RRR cut, tied specifically to banks that eliminate transfer fees, would incentivize this practice across the banking sector.

However, BSP Governor Eli Remolona Jr. indicated a preference for a uniform adjustment across all banks, rather than a targeted reduction. While acknowledging the need to lower the RRR, Remolona suggested that other tools could be used to incentivize lower interbank transfer fees instead of differentiating RRR rates.

Limcaoco countered that an across-the-board cut might not motivate banks to reduce fees, as there would be no direct incentive to do so. He believes that only a conditional approach would effectively encourage banks to lower or eliminate fees.