BusinessMirror BSP CUTS BANKS’ RRR ROTARY CLUB OF MANILA JOURNALISM AWARDS
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Saturday, September 21, 2024 Vol. 19 No. 340
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IN BID TO SPUR GROWTH
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By Cai U. Ordinario
HE Bangko Sentral ng Pilipinas (BSP) decided on Friday to adjust the reserve requirements of banks, allowing them to increase loans that they can extend to Filipinos nationwide. Starting October 25, 2024, universal and commercial banks (UKBs) and non-bank financial institutions with quasi-banking functions (NBQBs), digital banks, and thrift banks will have lower reserve requirements. Rural banks and cooperative banks (RCBs), meanwhile, will no longer have a reserve requirement. The last time the BSP reduced the RRR was in June 2023 when it delivered a cut of 250 bps to bring down the ratio to 9.5 percent from 12 percent (See: https://businessmirror.com.ph/2023/06/09/banksrrr-slashed-by-250-bps/). “The BSP emphasizes that these adjustments in reserve requirements are in line with its continuing efforts to reduce distortions in the financial system. The reductions will lower intermediation costs and promote better pricing for financial services,” BSP said. On Friday, BSP decided to reduce the reserve requirement ratios (RRRs) by 250 basis points (bps) for UKBs and NBQBs, effec-
and TBs to 1 percent. With the reduction in its RRR, RCBs will no longer have a reserve ratio by 25 October 2024. The BSP stressed that the reduction of the RRR will apply to the local currency deposits and deposit substitute liabilities of banks and NBQBs. “As inflation continues to track a target-consistent path over the next two years, the BSP will reassess the need for further reductions in the RRRs to better align them with regional norms over the medium term,” the BSP said.
Not inflationary
“If used wisely by banks, [the reductions] could help grow the economy by providing lower intermediation costs, thus lowering costs of business.”—Jonathan L. Ravelas
tively bringing this down to 7 percent from the current 9.5 percent starting October 25. Apart from UKBs and NBQBs, the BSP will also reduce the RRR for digital banks by 200 bps as well as thrift banks (TBs) and for rural banks and cooperative banks (RCBs) by 100 bps. This will also bring down the ratios to 4 percent for digital banks
JONATHAN L. Ravelas, senior adviser at professional services firm Reyes Tacandong & Co., told the BusinessMirror that the latest decision of the BSP will not be inflationary as the current rate is high at 9.5 percent. Even BSP Governor Eli M. Remolona Jr. earlier noted that he considered the 9.5 percent “ridiculously high” and thus shared his goal to reduce the RRR to 5 percent. “If used wisely by banks, it could help grow the economy by providing lower intermediation costs, thus lowering costs of business. It might not be inflationary. This is coming from 9.5 percent,” Ravelas told this newspaper. Given this latest development and the expectation that another rate cut will be delivered by the Monetary Board in its October 17 meeting, Ravelas said he expected
another RRR cut in the magnitude of 200 bps next month. This week, the BSP said it is keen on making a “substantial” reduction in the RRR this year (See: https://businessmirror.com. ph/2024/09/19/bsp-keen-on-heftycut-in-rrr-of-banks-in-2024/).
More liquidity to grow economy
IN a briefing on Wednesday, Remolona told reporters that the reduction in the RRR this year will be followed by further reductions in 2025. Remolona said that in exchange for the cut in the RRR, Philippine banks are willing to reduce transaction costs on payments. Regardless of this “funny dynamic,” Remolona said it is important to reduce the RRR “in a substantial way.” BSP Monetary Policy Sub-Sector Assistant Governor Zeno Ronald R. Abenoja said if the RRR is reduced, this could lead to additional liquidity to grow the economy through the increase in economic activities. Abenoja said, however, this will not be an immediate consequence. He explained that some of the liquidity needs to be deployed by banks in various financial markets. Remolona admitted that the transmission mechanism of monetary policy continues to be saddled by long lags. This is “because the markets are not deep and liquid.”
Aug BOP hits $88-M surplus on BSP net income inflows By Cai U. Ordinario
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HE country’s overall balance of payments (BOP) more than tripled in August 2024, according to the latest data released by the Bangko Sentral ng Pilipinas (BSP). The data showed the country posted a BOP surplus of $88 million in August 2024, or 254.39 percent higher than the $57-billion BOP deficit posted in August 2023. The figure in August was also 41.94 percent higher than the $62-million surplus posted in July 2024. “The BOP surplus in August 2024 reflected inflows mainly from the net income from the BSP’s investments abroad,” the statement read. BSP said the BOP surplus in August 2024 brought the year-to-date BOP level to a $1.6-billion surplus, lower than the $2.1-billion surplus recorded in JanuaryAugust 2023. The Central Bank also noted that based on the preliminary data from the Philippine Statistics Authority’s (PSA) International Merchandise Trade Statistics (IMTS), the trade deficit for January-July 2024 reached $29.9 billion, down from the $31.8-billion deficit posted in January-July 2023. “Based on preliminary data, this cumulative BOP surplus reflected mainly the
narrowing trade in goods deficit alongside the continued net inflows from personal remittances, trade in services, net foreign direct investments, net foreign borrowings by the national government (NG), and net foreign portfolio investments,” BSP said. The BOP position reflects an increase in the final gross international reserves (GIR) level to $107.9 billion as of end-August 2024 from $106.7 billion as of end-July 2024. The latest GIR level represents a more-than-adequate external liquidity buffer equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income. The BSP said this ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans. Moreover, it is also about six times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity. The BSP said short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.
FORMER Chief Justice Reynato S. Puno: “We need to change our world order to eliminate the use of force, violence and wars in inter-state relationship.” NONOY LACZA
WHAT DOES A WORLD AT WAR NEED? A
S the world teeters on the brink of war in many places while ongoing, bloody conflicts have ravaged places in the Middle East, Europe and parts of Northern Africa, among others, it is time to go back to the time when human civilization sought an end to warfare. According to former Chief Justice Reynato S. Puno, “We need to change our world order to eliminate the use of force, violence and wars in inter-state relationship.” Addressing the Rotary Club of Manila on Thursday (September 19), CJ Puno pointed out that, “Our present world order does not work because it is founded on power imbalance—only a handful of powerful countries dictate its direction, more specifically the five countries that wield the veto power in the UN Security Council. It excludes the legion of powerless nations in decision-making. Our world order does not work because it fails to appreciate the interconnectedness of all nations and the commonality of the problems they face like climate change, poverty, pandemic, etc.” The current world order, he added, “does not work because it continues to perpetuate narrow national interest instead of recognizing divergent values and interests. Our world order does not work because it is built on the values of competition, not cooperation, secrecy instead of transparency and accountability.”
Full text of his Rotary Club of Manila speech, “Warfare, Lawfare, A World of New Disorder,” on page A2.
PBBM AWARDS LAND TITLES, AND CERTIFICATES TO AGRARIAN REFORM BENEFICIARIES: President Ferdinand R. Marcos Jr. awards a land title to a recipient of the
government’s Agrarian Reform Program in Coron, Palawan. The President went to Coron on Thursday to distribute 1,287 Certificates of Land Ownership Awards (CLOA) and e-titles to 1,270 Agrarian Reform Beneficiaries (ARBs). PRESIDENTIAL COMMUNICATIONS OFFICE
PESO EXCHANGE RATES n US 55.7490 n JAPAN 0.3909 n UK 74.0737 n HK 7.1537 n CHINA 7.8920 n SINGAPORE 43.1661 n AUSTRALIA 37.9706 n EU 62.2326 n KOREA 0.0420 n SAUDI ARABIA 14.8569 Source: BSP (September 20, 2024)