BAP welcomes RRR cut

The Bankers Association of the Philippines (BAP) welcomed the reduction made by the Bangko Sentral ng Pilipinas (BSP) further reducing the reserve requirement ratio (RRR) for banks.

This was learned from BAP President Cezar Consing who said the cut will help align the country’s deposit reserves nearer to peers in the region.

“We are now closer to aligning our reserve ratios with the other countries in the region. I think it also reflects the governor’s confidence in the strength of the financial system,” Consing told reporters at the sidelines of the inauguration of the Bank of the Philippine Islands’ (BPI) largest branch on Thursday.

“We can now reduce our reserve ratio to be closer to the rest of the region. It’s because even at a lower rate, it’s still higher,” he added.

Earlier, BSP Governor Benjamin Diokno reiterated his commitment to bring the RRR to a single digit before the end of his term. With the recent cut, the RRR for universal and commercial banks now stands at 14 percent, significantly lower than the 18 percent at the start of the year.

Consing, who is also BPI president and CEO, said Diokno’s plan makes sense as it will enable banks such as theirs to provide more loans to clients, which will help spur economic activity.

“I think all banks would benefit, because there’ll be an opportunity to make more money. There (are) more loanable funds essentially…then that will increase the growth of lending that will foster economic growth,” the BAP chief said.

“(Its) impact shouldn’t be long. It can be as fast as two weeks, could be two months. It will work its way into the system,” he added.

Sought for comment on BPI’s loan activities, Consing said they expect further improvement given the initial “pretty good” numbers.

“Loans are pretty good. (Despite the fact that) loan growth this year is a little bit slower… it’s still pretty high,” Consing said.

In an earlier disclosure to the local bourse, BPI’s loan book showed an 8.2 percent annual expansion owing to consumer and corporate loans which grew by 12.5 percent and 7.4 percent, respectively.

The recent reduction on RRR was estimated to inject some P110 billion worth of fresh liquidity into the financial system.