Policy change to strengthen banking system – BSP

The Bangko Sentral ng Pilipinas (BSP) assured the banking sector on Wednesday that issues and concerns on the proposed changes in the “operational strengthening” of the reserve requirement would be considered.   In a statement, the BSP said the proposals of different banking organizations presented in a consultative meeting last Oct. 25 will be “evaluated in the context of prevailing macroeconomic conditions, both on the domestic and external fronts.”   Banks are presently required to keep 21 percent of their funds in reserves. Ten percentage points of those reserves are stored in BSP vaults while the rest are in the banks’ own secured premises.   The BSP said it wants to have “a better handle on the liquidity circulating in the financial system, with the view to enhancing the transmission of monetary policy actions on the economy.”   “In addition, it is expected to simplify implementation and enhance the BSP’s monitoring of banks’ compliance with reserve requirements,” the BSP claimed. Under consideration is the idea of keeping all reserves in the BSP.   The statement did not specify nor give details on what issues, concerns, and proposals were raised during the Oct. 25 consultations.   It did say that the ongoing perusal of the reserve requirement policy is meant to strengthen it as a liquidity management tool.   On July 24, the BSP Monetary Board decided to raise the reserve requirement to 21 percent from 19 percent.   August and September data on money supply later showed the growth of money in circulation slowed down to 7.4 percent in September from 9.0 percent a month earlier.    Money supply stood at P4.356 trillion as of Sept. 30, up by P59 billion from P4.297 trillion as of end-August and by P300.4 billion from P4.056 trillion as of end-September 2010, BSP data showed.   Quasi-money in banks increased by only P170.4 billion in September compared to P252.827 billion in the month prior — or down by P82.427 billion. Quasi-money totaled P2.914 trillion.   Currency outside depository corporations and transferable deposits, which is mostly cash in the hands of the households and businesses, was steady at P1.34 trillion. — ELR/VS/KG, GMA News