MANILA, Nov 13 (Reuters) The Philippine central bank is seeking comments
from local lenders on a plan to modify the current regime of reserve
requirements, a move aimed at aligning rules with international
standards and not to tighten or loosen policy, officials said.
The Bangko Sentral ng Pilipinas (BSP) is planning to revise the
structure of banks' required reserves, now at a total 21 percent, by
merging liquidity and statutory reserves into one category, and may stop
paying interest on these funds parked at the central bank.
Authorities are also considering to stop the practice of allowing banks
to classify cash kept in their bank vaults as part of reserves,
according to some bankers who have seen the proposal.
"There is a consultation primarily to simplify and rationalise the
reserve requirement structure, emphasis on structure," BSP Deputy
Governor Nestor Espenilla said in a mobile text message on Sunday.
"Nothing is firm yet since market comments are still being solicited.
But the initiative should not to be confused with monetary
tightening/loosening action," he said.
The 21 percent reserve ratio of banks is broken down into 10 percent
statutory and 11 percent liquidity. The central bank now pays 4 percent
per annum on up to 40 percent of deposits maintained by banks as
statutory reserves.
Interest paid by the central bank on liquidity reserves are based on the
rate of comparable government securities less half a percentage point.
Some bankers are concerned that taking away the liquidity reserve
category may lead to higher financial intermediation costs, with the
funds now pegged to market rates. But the central bank said there was
likely to be negligible impact.
"We computed that, very small share. Our proposals are based on complete
staff work," Deputy Governor Diwa Guinigundo said in a mobile text
message to Reuters.
"These proposals are consistent with the fundamental principle that
reserve requirement is a prudential policy and that distinctions should
be done away with," he said.
"Not remunerating the banks for their reserve deposit is allowed under
the law. Very few central banks are paying banks on their reserve
deposits," Guinigundo said.
Some bankers say the central bank may have to lower the reserve ratio if
it wants to stop paying interest on the funds, as is the practice in
other countries.
The BSP raised the reserve ratio by a total of 2 percentage points in
June and July in a bid to bring it back to its preglobal crisis level.
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