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Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, announced a cut in the reserve requirement ratio (RRR) for banks by 200 basis points, effective in the week of March 28.
According to Reuters, this move will lower the reserve requirement for universal and commercial banks to 5%. Additionally, the RRR for digital and thrift banks will be reduced by 150 basis points and 100 basis points, respectively.
This decision follows the central bank’s unexpected move to maintain interest rates during a policy review last week. At that time, BSP Governor Eli Remolona indicated that the bank was considering further reductions in reserve requirements, although the timing was not specified. The last RRR cut occurred in September, which saw a reduction of 250 basis points, bringing it down to 7%.
The central bank emphasized its strategic goal of promoting efficient allocation of bank funds into productive loans and investments. According to the BSP, lowering the RRR is expected to reduce financial intermediation frictions, allowing banks to better serve the economy.
The BSP’s announcement coincides with the ongoing weakness of the US dollar, which persists despite the looming threat of tariffs. The central bank’s action aims to encourage economic growth by making more funds available for lending and investment, thereby supporting the broader financial system and economy.
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