Banks’ reserves-compliant loans hit P271 B

Published May 23, 2022, 3:02 PM

by Lee C. Chipongian

Banks’ loans as alternative compliance to the reserve requirement (RR) increased to P271.1 billion as of mid-April, up by 43.4 percent from same period last year of P189.1 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

The RR-compliant loans were also 1.8 percent higher from mid-March 2022 of P266.3 billion.

Micro, small and medium enterprises

Since 2020, the BSP allows banks to use loans to micro, small and medium enteprises (MSMEs) and large enterprises not affiliated with conglomerates as alternative compliance with the RR against deposit liabilities and deposit substitutes. It is one of BSP’s anti-pandemic measures to make sure banks are continuously supporting key sectors of the economy.

The utilization of loans as RR compliance is still low, however. The BSP has set a limit of P300 billion for MSMEs and P425 billion for large enterprises.

As of mid-April, banks released P204.6 billion of loans to MSMEs as RR alternative compliance. This accounted for 13.1 percent of total required reserves for the reserve week of April 14. Compared to same period in 2021, it was higher from P174.9 billion.

Loans allocated for large enterprises, meantime, reached P66.5 billion in mid-April, accounting for 4.3 percent of total required reserves. This was also higher compared to P14.2 billion in 2021.

The BSP’s regulatory relief measure was first granted in March 2020 to ensure banks will continue to support MSMEs during the long lockdown periods.

Banks have an existing mandatory credit allocation of eight percent of their loanable funds for micro and small enterprises and two percent for medium enterprises under Republic Act No. 6977 for the development of the small and medium scale enterprises.

Based on BSP data as of end-2021, banks’ compliance was only 2.08 percent for micro and small enterprises. This translates to P178.14 billion loans for micro and small enterprises when banks should have loaned P685.60 billion.

However banks had a 3.33 percent compliance rate for medium enterprises, more than the required two percent, releasing P284.99 billion last year versus minimum required of P171.42 billion.

RA No. 9501 or the Magna Carta for MSMEs is the updated version of RA No. 6977 which was enacted in 1991 and amended by RA No. 8289 in 1997, and further amended in 2008 as RA No. 9501.

The alternative compliance with RR is until Dec. 29 but “subject to early closure, if warranted and with prior notice,” said the BSP.