Philippines central bank mulls reserve ratio cuts

Bloomberg

The Philippine central bank will consider reducing the reserve requirement ratio for lenders further if banks don’t misbehave and speculate against the peso, Governor Benjamin Diokno said.
Bangko Sentral ng Pilipinas will “closely look at how banks will use funds freed up by RRR cut,” Diokno told a forum in Ma-nila, a day after announcing a 2 percentage-point reduction in the funds that large banks must hold in reserve. “Proper use will encourage further cuts and speculation will do otherwise.”
The reserve ratio will be lowered in three stages: to 17% from 18% on May 31, then to 16.5% on June 28 and 16% on July 26. The move follows a 25 basis-point reduction in the benchmark interest rate, providing more stimulus to the Southeast Asian economy after it grew at the slowest pace in four years in the first quarter.
Diokno, who took office in March, is following through on a pledge by his predecessor, the late Nestor Espenilla, to bring down Southeast Asia’s highest reserve ratio to single digits by the middle of 2023. The move should help ease a liquidity crunch after money supply grew at the slowest pace in more than a decade at 4.2% in March. Loan growth was the lowest since 2015 in the same month.
The Monetary Board initially planned to implement a series of four cuts of 50 basis points each but decided to move more aggressively “to reduce speculation and allow bankers to prepare,” Diokno told the Italian Chamber of Commerce.