BSP tightens reserve rules for lenders

The central bank has set a limit on the amount of loans to small and large businesses that lenders can count as part of their reserve requirement compliance, Governor Benjamin E. Diokno said on Friday.

In a statement, Mr. Diokno said total loans to micro-, small- and medium-sized enterprises (MSME) and large enterprises counted as alternative compliance with the reserve requirements were capped at P300 billion and P425 billion, respectively.

The limits, which were based on simulations, would ensure that the use of loans as an alternative compliance is consistent with local liquidity conditions and projected growth, he said.

BSP-supervised financial institutions should continue to avail themselves of the relief measures to sustain lending and financial support to viable MSMEs and large enterprises, Mr. Diokno said.

“Access to finance by these businesses will contribute to the recovery of the domestic economy and will help secure our envisioned path of sustainable and inclusive growth,” he added.

The central bank in April allowed lenders to use credit to MSMEs as part of their reserve requirement compliance to support lenders amid a coronavirus pandemic.

Once the limit has been reached before the end of 2022, the central bank would amend policies to close the validity of the relief measure. The rules allow banks to use these loans as part of their compliance until Dec. 29, 2022, unles closed earlier.

The cap on loans would not affect the rural banks because it is too high considering the sector’s asset base, Elizabeth C. Timbol, president of the Rural Bankers Association of the Philippines, said in a Viber message on Friday.

“Rural banks will continue to extend loans to MSMEs and utilize the regulatory relief on alternative compliance with the reserve requirement,” she said.

MSMEs make up 99% of all establishments in the country and employ more than 60% of the total labor force. — Beatrice M. Laforga