THE Bangko Sentral ng Pilipinas (BSP) has given assurances that its liquidity support and regulatory relief measures will stay in place for banks and other financial institutions even if regions transition from modified enhanced community quarantine (MECQ) to general community quarantine (GCQ).
In a webinar on Thursday hosted by the Financial Executives Institute of the Philippines (Finex) and the Management Association of the Philippines (MAP), BSP Governor Benjamin Diokno acknowledged that the uncertainty surrounding the resolution of the pandemic remains high and that the long-term growth path may change in the post-pandemic world.
“Since operational capacity remains constrained even under the general community quarantine phase, the liquidity support and regulatory relief measures will remain, subject to the general conditions of the economy and the financial sector,” the BSP governor said.
The BSP said they are working on a plan for a smooth transition of the relief measures issued by the BSP should they see a need to gradually reduce them as the economy recovers.
“When domestic developments warrant a scale-down of policy support as economic recovery gains traction, the BSP will ensure a smooth transition in winding down its time/state-bound measures. Exit strategy essentially entails reversion to policies that are consistent with a long-run economic growth path,” Diokno said.
“We note that the winding down of support policies and regulatory measures too early or too late may be harmful and may significantly dampen economic recovery. With this in mind, we will remain data-dependent in our assessment of monetary and economic conditions. In addition, we will remain watchful of external developments that could impact on domestic monetary and liquidity conditions,” he added.
Earlier this year, the Monetary Board approved the granting of temporary regulatory and rediscounting relief measures to banks and other monitored financial institutions.
These measures include relaxation of BSP regulations such as the single borrower’s limit, penalty for reserve deficiencies, compliance period with BSP supervisory requirements, and know your customer (KYC) requirements to facilitate access to financial services.
Prudential accounting relief measures were also implemented to reduce the impact of Mark-to-Market (MTM) losses on the financial condition of supervised financial institutions.
The BSP also launched a package of measures to support more lending to micro-, small-, and medium-sized enterprises (MSMEs), such as allowing banks to include new MSME loans as part of their compliance with the required reserve ratio; temporarily reducing credit risk weight of MSME loans that are current in status; and assigning zero weight to MSME loans with government guarantee.
For a liquidity boost, the BSP has also reduced the reserve requirement ratio (RRR), suspended the term deposit facility auctions for certain tenors, ensured availability of the overnight lending facility (OLF) to counterparties to cover temporary day-to-day liquidity needs, and scaled down reverse repurchase (RRP) operations to help provide sufficient liquidity in the interbank loan and government securities markets.
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