Banks have allocated P239.4 billion worth of loans as alternative compliance to the reserve requirement (RR) rule to ensure continued support to the country’s key economic sectors.
Based on Bangko Sentral ng Pilipinas (BSP) data, loans to micro, small and medium enterprises (MSMEs) and large enterprises that are not affiliated with conglomerates have reached P202.2 billion and P37.2 billion, respectively, as of the first reserve week of November.
Compared to same period in 2020, banks’ loans as RR compliance have significantly increased from P123.6 billion worth of MSME loans last year. Loans to large enterprises, in the meantime, totaled P29.5 billion in the same period in 2020.
These loans are considered alternative compliance with the RR against deposit liabilities and deposit substitutes.
The P202.2 billion loans to MSMEs represented 13.6 percent of total required reserves during the period. The loans to large enterprises used as RR represented 2.5 percent of total required reserves for the same reserve week.
Both amounts are still conservative since the BSP has set a limit of P300 billion for MSMEs and P425 billion for large enterprises.
BSP Governor Benjamin E. Diokno has said that the limits are calibrated based on different simulations and are meant to ensure that the use of loans as an alternative mode of compliance is in line with domestic liquidity conditions and projected growth.
As part of relief measures to cope with the effects of the COVID-19 pandemic, the BSP has allowed the use of loans to MSMEs and large enterprises as alternative compliance with RR until December 29, 2022, but “subject to early closure, if warranted and with prior notice.”
After 2022, the BSP will close the eligibility window on the use of these relief measures.
The BSP has also made some changes to the allowable modes of alternative compliance which is now specific to peso-denominated loans granted to MSMEs and large enterprises.
Only 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.
The BSP have other relief measures that are MSME-related such as temporarily reducing from 75 percent to 50 percent the credit risk weight of MSME loans that are current in status and assigning zero weight to MSME loans covered by guarantees from the Philippine Guarantee Corporation, Agricultural Guarantee Fund Pool, and the Agricultural Credit Policy Council.