BSP Amends Rules on Reserves Against Deposits and Deposit Substitute Liabilities of Banks

On 29 June 2023, the Bangko Sentral ng Pilipinas (“BSP”) issued BSP Circular No. 1176 (“Circular”) on the amendments to the Manual of Regulations for Banks rules and regulations governing the reserves against deposits and deposit substitute liabilities of banks. 

The required reserves against deposit and deposit substitute liabilities in local currency of banks effective 30 June 2023 shall be 6% for peso deposits lodged (i) under due to foreign banks and (ii) peso deposits lodged under due to Head Office/Branches/Agencies Abroad (Philippine branch of a foreign bank) for Digital Banks and 9.5% for Universal and Commercial banks.

The Circular also discusses allowable modes of alternative compliance. For instance, the use of peso-denominated loans granted to micro-, small-, and medium enterprise (“MSME”) or large enterprise as allowable alternative compliance with the reserve requirement shall be available to banks for an extended period until 30 June 2023. In cases of Thrift Banks, Rural Banks, and Cooperative Banks, the outstanding MSME or large enterprise loans of these banks that are utilized as alternative compliance with the reserve requirement as of 30 June 2023 shall remain eligible for such purpose until said loans are fully paid but not later than 31 December 2025. The Circular adds that the applicable outstanding loans shall not be increased but may be reduced. Once reduced, the loans cannot be increased thereafter.

However, if these loans become past due or non-performing or are extended, renewed, or restructured, they will no longer be eligible for alternative compliance with the reserve requirement. Any new MSME or large enterprise loans granted after the 30 June 2023 deadline will not be eligible for use as alternative compliance with the reserve requirement.