Thrift banks call for lower liquidity requirements
The local thrift banking industry will still lobby for lower liquidity requirements despite the removal of their reserve requirements, as the sector continues its call for more policy stimulus to boost their lending activities.
While the zero reserve requirement ratio of thrift banks was a welcome development, Mary Jane Perreras, president of the Chamber of Thrift Banks (CTB), said bringing down the sector’s minimum liquidity ratio (MLR) of 20 percent would allow these small lenders to disburse more loans.
The CTB is still in talks with the Bangko Sentral ng Pilipinas (BSP) about its request to bring the MLR back to the pandemic-era level of 16 percent, she added.
“We’re hoping that maybe, that [MLR cut] would be the next. Because it’s much better for us, especially for the small banks, to be able to lend more,” Perreras told reporters on the sidelines of the CTB’s general membership meeting last week.
“I’m sure they [BSP] will be open to that—especially now that we have zero percent [reserve requirement] already. Let’s see. We will continue to request it from them,” she added.
The BSP had been cool to proposals to cut the MLR of thrift banks, arguing that the current requirement was “appropriate” and would ensure that smaller lenders have enough cash to withstand potential stress events while continuing to meet the funding needs of their clients.
Ultimately, the central bank said that reducing the MLR to 16 percent—which was implemented at the height of the pandemic as a regulatory relief measure—was “not warranted at this time.”
Gradual cut?
It may be recalled that the CTB had repeatedly called on the BSP to lower the MLR again to free up more loanable funds to support economic growth.
BSP data showed the thrift banking sector had over P35 billion in additional loanable funds as of May 2024. This, while the majority of such banks reported MLRs that significantly exceed the mandated ratio of 20 percent.
The BSP had said the MLR and reserve requirement are “not additive in nature” because they serve distinct purposes. The MLR is a micro-prudential requirement intended to promote banks’ short-term resilience to liquidity shocks. In contrast, the reserve requirement is employed as a monetary policy tool to help manage the volume of domestic liquidity.
For CTB’s Perreras, the central bank might want to consider lowering the MLR of thrift banks “paunti-unti (gradually).”
“I’m sure they have reasons why it’s being there at 20 percent. But we hope that they would also reconsider our request,” she added.
