The Bangko Sentral ng Pilipinas (BSP) will eliminate reserve requirements for trust accounts TOFA) and mortgage-backed certificates starting Feb. 27, a move by the central bank to streamline liquidity and reduce intermediation costs for local lenders.

According to the latest BSP circular issued on Wednesday, Feb. 11, the required reserves against trust and other fiduciary accounts, known as TOFA, will be set at zero percent.

The new BSP policy also removes reserve mandates for all issuances of mortgage and chattel mortgage certificates.

The circular, signed by the Governor, aligns with the regulator’s broader push to simplify the reserve framework and encourage banks to deploy capital into productive sectors rather than holding idle cash.

Under the updated guidelines, thrift banks may issue and trade mortgage and Collateralized Home Mortgage certificates, provided they secure prior approval from the Monetary Board. This move is expected to bolster the secondary market for housing-related debt and provide smaller lenders with more flexible funding options.

While the central bank is loosening reserve mandates for specific instruments, it is simultaneously tightening its grip on reporting and compliance. Financial institutions authorized to engage in trust and fiduciary businesses are required to submit regular reports using the Prudential Reporting Innovation and Monitoring Engine (PRIME). This electronic platform is central to the BSP’s efforts to digitize regulatory oversight and ensure real-time tracking of systemic liquidity.

The regulator also signaled it would take a harder line against lenders that fail to maintain adequate liquidity buffers. The BSP defines a “chronic reserve deficiency” as net shortfalls for two consecutive periods.

Banks found in violation of these rules face severe administrative sanctions, including being barred from central bank credit facilities. The BSP may also restrict such lenders from making new loans or investments and prohibit the declaration of cash dividends until the deficiency is rectified.

This pivot follows a sustained easing cycle throughout 2025, during which the central bank aggressively lowered the reserve requirement ratio for various categories of lenders. The RRR for universal and commercial banks was slashed by 200 basis points to 5 percent in February 2025. Digital banks saw their ratio cut to 2.5 percent, while the requirement for thrift banks was eliminated entirely.

The new guidelines for trust accounts and mortgage certificates will take effect 15 days after publication in the Official Gazette or a newspaper of general circulation.