THE Bangko Sentral ng Pilipinas (BSP) on Thursday announced its decision to exclude Specialized Institutional Accounts under Trust (SIT) from being subject to reserve requirements (RR).
The amendment came after the Monetary Board approved existing regulations on Trust and Other Fiduciary Account-Others to include SIT among the accounts that are exempt from RRs.
The BSP said this move is seen to benefit the accounts established by institutions, foundations agencies, whether government or private (e.g., NGOs) registered with the Securities and Exchange Commission or the Cooperative Development Authority.
These accounts are primarily established for charitable, religious, educational, athletic, scientific, medical, cultural, specialized lending or developmental projects, or such other purposes of similar nature.
Prior to the amendment, these accounts were subject to reserve requirements of 16 percent for universal and commercial banks, 8 percent for thrift banks and 4 percent for rural banks.
The reserve requirement ratio is one of the Central Bank’s liquidity tools to control monetary conditions in the country. It is the portion of depositors’ balances that banks are asked to keep idle in the BSP’s vaults as reserves.
Reserve requirements usually affect the earnings potential of the account since these reserves cannot be used for investment and are only parked in the Central Bank.