The Chamber of Thrift Banks (CTB) is once again urging the Bangko Sentral ng Pilipinas (BSP) to reduce the minimum liquidity ratio (MLR) for thrift banks to 16 percent.

Despite the central bank's opposition, CTB president Cecilio San Pedro said a lower MLR would provide much-needed flexibility for smaller banks, especially in managing liquidity.

“We reiterated our request for the BSP to consider reducing the MLR from 20 percent down to 1 percent, noting that this will provide much-needed flexibility for smaller banks in managing liquidity,” San Pedro said during the chamber’s third general membership meeting.

In CTB's recent meeting, the discussion focused on how the MLR requirement could affect its standalone member banks.

Last month, the BSP opposed the MLR reduction for thrift banks to 16 percent, citing the industry's ability to comply with current requirements.

However, San Pedro said that BSP is open to considering a reduction in the MLR “should future circumstances warrant it, and we will continue to engage them on this important matter.”

As the BSP clarified, the MLR ensures banks' short-term resilience to liquidity shocks, while reserves are considered liquid assets and serve a separate monetary policy function.

The most recent instance when the BSP temporarily lowered the MLR for standalone thrift banks was in April 2020, when it implemented measures to support the banking sector during the early stages of the Covd-19 pandemic.

It injected P10 billion into the financial system, enhancing economic activity during the pandemic.

Also, in the chamber’s meeting, stakeholders proposed granting additional licenses to member banks to manage foreign exchange risks in sustainable projects.

According to San Pedro, this aligns with the Payment Services Directive (PSD) score to address risks in renewable energy. (Derco Rosal)