THE Bangko Sentral ng Pilipinas (BSP) announced on Tuesday that it has also slashed the reserve requirement needed for bond issuances, following their mandate to reduce the banks’ reserve requirement ratio to single digit by the end of the governor’s term.
In a statement, the monetary board announced that it has approved the reduction in the reserve requirement rate for bonds issued by banks and other financial institutions to 3 percent.
The BSP said this is “part of its commitment to contribute to deepening of the local debt market.”
This rate is lower than the required reserves of other
debt instruments issued by banks such as long-term negotiable certificates of
time deposits, currently at 4
percent.
“The lower bank reserves on bond issuances is expected to reduce the bond issuers’ intermediation cost that could be passed on to the holders of such securities,” the BSP explained.
“The adjustment in the required reserves for bonds complements the BSP’s earlier policy issuance streamlining the rules and requirements for the issuance of debt instruments by banks and other financial institutions,” it added.
According to the statement, the initiative is intended to incentivize banks and other financial institutions to tap the domestic bond market as part of its liquidity management.
The new reserve requirement ratio shall take effect on the reserve week beginning November 1, 2019.