ASEAN KEY DESTINATIONS
Philippine bank reserves to stay
"Given [money supply] growth [and considering gross domestic product growth, inflation], there's no need to adjust. We try to avoid using very blunt instruments," Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr. told reporters.
Monetary authorities insist they are comfortable with the current level of reserve requirements of banks and would only make the necessary adjustments if there is a need to siphon off or release funds into the financial system.
As part of its liquidity enhancing measures to cushion the impact of the global financial meltdown, the BSP had cut the reserve requirement of banks to 19 percent from 21 percent to release more liquidity into the financial system.
The current level is the highest in the Asia Pacific region. In most neighboring countries, the reserve requirement was only in the single-digit level.
Roberto Juanchito Dispo, executive vice president of the First Metro Investment Corp., said the BSP may want to revisit the reserve requirement of banks to encourage the industry to lend more.
"At 19 percent that translates to 2 percent additional funding cost to the banks. Immediately, when they reduce reserve requirements, lending rates will go down. So that will spur lending," Dispo told reporters.
Separately, BSP Deputy Gov. Diwa Guinigundo said banks are not lending even though interest rates are "historically low."
"Banks are not lending because probably there's not enough demand for loans. Anecdotal evidence would tell us that many micro, as well as small and medium enterprises, find it difficult to borrow from the banks because of the documentary requirements, not so much the level of interest rates," Guinigundo said.
He said the real issue in the country is not the price of credit, but the availability of it, since borrowers will get a loan from the bank if they need credit regardless of the level of interest rates.
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