UNIVERSAL and commercial banks will no longer be able to use loans to micro, small and medium enterprises (MSME) and large enterprises (LE) as alternative to compliance with the reserve requirement, the central bank said, as it prepares to unwind relief measures imposed during the pandemic.
Starting July 1, 2023 the Bangko Sentral ng Pilipinas (BSP) said it “will begin to unwind the temporary regulatory relief measure allowing banks to utilize peso-denominated loans to micro-, small- and medium- enterprises (MSMEs) and large enterprises (LEs) that are critically impacted by the COVID-19 pandemic as alternative compliance with the reserve requirements (RR).”
“The unwinding of the temporary relief measure will restore the use of the RR as an instrument for managing liquidity in the financial system in line with the BSP’s broader agenda of enhancing its liquidity management capabilities. It will also simplify the administration of banks’ compliance with the reserve requirement,” the BSP said.
The unwinding of the relief measure is set to coincide with the reduction in reserve requirement ratio (RRR) by 250 basis points which is set to take effect on June 30. The adjustments will bring the RRRs of universal and commercial banks and non-bank financial institutions to 9.5 percent, the BSP said.
The BSP said this would support the banks’ continued compliance with the reserve requirement and in managing friction costs related to policy adjustments.
Meanwhile, thrift, rural and cooperative banks will still be allowed to utilize outstanding MSME and LE loans as of June 30 as alternative mode of compliance with the RR until such loans are fully paid but not later than Dec. 31, 2025, the central bank said.
Outstanding MSME and LE loans of the said banks that are overdue or non-performing or are extended, renewed or restructured will no longer be eligible as alternative compliance with the RR, the BSP said.
New MSME and LE loans granted after the expiry of the relief measure won’t be eligible as alternative compliance to RR, it added. (ABS-CBN News)
