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Manila Bulletin devider Business devider Banks release P281.3-B compliance loans in Sept.

Banks release P281.3-B compliance loans in Sept.

Published Nov 27, 2022 09:10 pm

Bank lending as alternative compliance to reserve requirements (RR) totalled P281.3 billion as of September, up by 21 percent from same period last year of P232.4 billion.

Based on Bangko Sentral ng Pilipinas (BSP) data, RR-compliant loans to micro, small and medium enterprises (MSMEs) reached P220.1 billion as of the reserve week in late September, 13.1 percent higher compared to same time in 2021 of P194.6 billion.

Loans to large enterprises, meantime, rose by 61.9 percent to P61.2 billion this year from P37.8 billion same time in 2021.

BSP building and logo/Reuters

RR-compliant loans to MSMEs accounted for 13.9 percent of total required reserves during the period while loans to large enterprises was 3.9 percent of total reserves. The aggregate limits for MSME loans is P300 billion and P425 billion for large enterprises.

As part of BSP relief measures while there is a pandemic, the BSP allowed banks to use loans to MSMEs and large enterprises that are not affiliated with conglomerates as alternative compliance with the RR against deposit liabilities and deposit substitutes.

“Availment of the BSP’s relief measure on the use of new or re-financed loans to MSMEs and eligible large enterprises as alternative compliance with the (RR) continues to be strong,” said the BSP in a report.

At the moment, RR ratio is at 12 percent for big banks and 14 percent for non-banks with quasi banking functions. Thrift banks have three percent reserves ratio while rural banks have two percent.

The relief measure will lapse on Dec. 29 this year. The policy was first issued on April 24, 2020 for MSMEs and May 29 of the same year for large enterprises.

The BSP had intended to reduce the RR ratio before the expiration of the relief measure by end-2022 but with high inflation which had to be dealt with by tightening monetary policy, an RR ratio cut will have the opposite desired effect.

To address the excess liquidity that will be released after Dec. 29, the BSP allowed trust units of banks or stand-alone trust companies to buy BSP securities in the secondary market.

As the relief measure winds down, the move improves BSP’s ability to control money supply through their open market facilities in particular through the issuance of the 28-day bills.

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