The Bangko Sentral ng Pilipinas (BSP) is eyeing to unleash massive amounts of cash into the market by cutting down bank reserve requirements by nearly half over the next three years.
“My vision is that by the end of my term, the reserve requirement should be single digit so it should be around nine percent,” said BSP Governor Bejamin Diokno in an interview with ANC.
“Right now it’s 14 percent, so I have 500 basis points to fulfill my promise, that’s five percent over aperiod of 14 quarters. I’ve already told them for forward guidance,” Diokno added.
The BP will release roughly P100 billion ($1.9 billion) for every one percentage point reduction which meas Diokno’s plan will make available P500 billion for fresh loans and investments.
Diokno’ predecessor, the late BSP Governor Nestor Espenilla Jr., had previously raised reserve requirements by 175 points to tame inflation amid the spike in rice prices in 2018.
Since his takeover n March 2019, Diokno has reduced bank reserve requirements by 175 basis points.
Diokno is serving the unexpired term of Espenilla Jr. which will end on July 2023.