Bank loans used as alternative compliance to the reserve requirement (RR) rule has reached P215.8 billion as of the reserve week ending in May, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP counted loans to micro, small and medium enterprises (MSMEs) and selected large enterprises as compliance to the RR last year as part of its package of relief measures to banks amid the COVID-19 pandemic. This measure allowed banks to better manage the pandemic impact on their balance sheets and finances, and release funds for more lending.

Loans to MSMEs amounted to P182.2 billion in end May while loans to large enterprises totaled P33.6 billion.

Both amounts are far from the limit set by the BSP when last year, during the first weeks of the pandemic, it authorized banks to use loans to MSMEs and large enterprises not affiliated with conglomerates as RR alternative compliance against deposit liabilities and deposit substitutes.

The utilization of loans to MSMEs as RR-related relief measures are capped at P300 billion and P425 billion for large enterprises.

As of the reserve week ending in May, loans used as RR compliance to MSMEs was only 12.5 percent of the total required reserves, while loans to large enterprises was only 2.3 percent.

Utilization of loans to both MSMEs and large enterprises under the relief measures is still significantly far from the aggregate limits set by the Monetary Board, said the BSP. “In fact, the latest utilization leaves P117.8 billion and P391.4 billion in available balance for loans to MSMEs and large enterprises, respectively,” it said.

To boost market confidence and ensure adequate liquidity and credit in the financial system, the BSP last year reduced the RR ratio or the cash reserves ratio by 200 basis points from 14 percent to 12 percent, releasing more than P200 billion of fresh bank funds in the financial system. Banks cannot release as lending these cash reserves with the BSP. The RR ratio is the percentage of bank deposits and deposit substitute liabilities with the BSP.

Other time-bound regulatory relief measures approved by the BSP since 2020 are loan payments’ grace periods, capping credit card interest rates and fees, and staggered booking of loan losses. The BSP also approved grace periods on rediscounted loans, as well as increasing the single borrower’s limit and imposing a higher limit on real-estate loans.

The BSP also allowed other modes of alternative compliance to MSMEs and large enterprises such as loans that are current and not past due or non-performing are eligible to be considered as alternative compliance to the RR. The exception is an MSME loan or large enterprise loan that has been renewed or restructured.