From 20% to 9%: Espenilla wants lower reserve requirement for banks
If he had his own way, he’ll bring the level to a record low.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla, Jr. said he wants to see the 20% reserve requirement ratio (RRR) to be trimmed drastically under his watch, if only the conditions are right to unlock more liquidity.
“The RRR is something that I would like to personally see to single-digit level. But there is a game plan for it. Our game plan is to do it in such a way to avoid the situation that we are unleashing too much liquidity that the economy is unable to absorb,” Espenilla said
The RRR is currently at 20% and is among the highest in the world. It means that banks cannot use one-fifth of its deposit stash for other purposes other than standby cash.
Espenilla would need a confluence of factors before he can lower the RRR, as any hasty move could open the floodgates and result in cheap money.