Connect with us

Hi, what are you looking for?


Policy rates to remain low — Diokno

The Bangko Sentral ng Pilipinas (BSP) may trim banks’ reserve requirements further to encourage lending and boost economic activity, Governor Benjamin E. Diokno said. — PHILIPPIINE STAR/ MIGUEL DE GUZMAN

THE Philippine central bank will keep benchmark interest rates low to support economic recovery amid a coronavirus pandemic, its chief said on Wednesday.

The Bangko Sentral ng Pilipinas (BSP) may also cut banks’ reserve requirements further to encourage lending and boost economic activity, Governor Benjamin E. Diokno said.

“It’s never too early at this time because the pandemic is not yet over. In fact our policy is that we will keep this policy for long until such time that we see economic growth at 6.5% to 7.5%,” he said during the BusinessWorld One-on-One online interview on Wednesday.

Economic managers expect gross domestic product (GDP) growth at 6.5%-7.5% this year, after GDP likely contracted by 8.5%-9.5% in 2020.

The BSP slashed rates by a total of 200 basis points (bps) last year, bringing down the overnight reverse repurchase, lending and deposit rates to 2%, 2.5%, and 1.5%. Some analysts, including Fitch Ratings, have said there is not much space left for further easing amid negative real interest rates as the BSP expects inflation to settle at 3.2% this year.

The BSP was one of the most aggressive in policy easing last year. The first rate cut was delivered in February, with the central bank citing uncertainty over the coronavirus disease 2019 (COVID-19) outbreak.

“I do not apologize for the speed at which the central bank acted. It calmed down the market and it reduced the borrowing costs for businesses and the National Government,” Mr. Diokno added.

He said there is still room for further cuts in banks’ reserve requirements this year.

“Whether we will cut further will depend on whether there’s still need for more liquidity but at the moment, there’s ample liquidity, so I don’t see the need for an additional cut in the reserve requirement at this time,” Mr. Diokno said.

Bank lending grew by less than a percent in November, the slowest in 14 years as lenders tightened credit standards.

This is despite BSP’s liquidity-infusing measures that have added about P2 trillion into the financial system, or equivalent to about 10% of the country’s gross domestic product.

“Maybe things will change once the economy starts recovering and with the speed of recovery, we may consider additional cuts in the reserve requirement,” the BSP chief said.

In 2020, big banks’ reserve requirements were slashed by 200 bps to 12%, while those for thrift and rural lenders were trimmed by 100 bps to 3% and 2%, respectively. Mr. Diokno has vowed to bring the ratio to a single digit by the end of his term in 2023.

Mr. Diokno, who is also a former Budget secretary, said the country is in a much better position than in the previous crises.

“I’ve seen that whenever we have a crisis in the Philippines, we run out of dollars because we have a huge foreign debt and because we do not want capital exiting the country, we raise interest rates,” he said.

The country’s gross international reserves as of end-November stood at a record $104.5 billion, enough to cover 11.2 months of imports and about 9.3 times the country’s short-term external debt based on original maturity.

“We’re now looking at around maybe $110 billion this year and even $120 billion next year — that is equivalent to close to a one-year import requirement,” Mr. Diokno said.

The BSP chief said the banking system remains stable, adding that they do not see any emerging problems based on data from individual banks and the industry.

The nonperforming loan ratio continued to rise for the 10th straight month to 3.81% as of end-November. This level is still manageable compared with its peak of 17.6% in 2002 due to the Asian financial crisis, Mr. Diokno said.

He said the passage of the Financial Institutions Strategic Transfer (FIST) bill would significantly cut bad loans. The measure, which will allow lenders to offload bad loans to asset management corporations, was approved by the bicameral conference committee in December and is awaiting the approval of President Rodrigo R. Duterte.

“It’s [FIST] just a fallback position. But we don’t see any situation worsening at this time. Even without the FIST bill, the banking industry can handle the crisis,” he said.

Banks’ capital adequacy ratio hovers around the 15% territory, which is well above the 10% minimum requirement of the BSP. Lenders also beefed up loan loss reserves by 65.4% to P352.733 billion in November.

The BSP is aiming to make 50% of payments in value and volume done digitally, but Mr. Diokno admitted a totally cashless society is not possible “within my lifetime.”

“But I can assure you maybe a coinless society by 2025 for sure, because that will be replaced by the QR Code PH, which we are pushing to get our national ID,” he said.

In 2019, the BSP launched the P20 coin, which now coexists with the bill version of the denomination. — Luz Wendy T. Noble

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



By Keisha B. Ta-asan, Reporter THE NATIONAL Government’s (NG) outstanding debt hit a record-high P13.75 trillion as of end-February as domestic borrowings increased, the...


STATE SPENDING on infrastructure rose by 13.4% in 2022, as the government ramped up public works and transportation-related projects. According to the Department of...


BUSINESSES NOW have a more optimistic economic outlook this year, amid a return to pre-pandemic normalcy and increased consumer demand, a survey by the...


SEVERAL former government officials are opposing the plan to merge Landbank of the Philippines (LANDBANK) with the Development Bank of the Philippines (DBP), saying...


MONDE NISSIN CORP. suffered a net loss of P13.03 billion in 2022, a reversal of its P3.12-billion net income a year earlier, due to...


MGEN RENEWABLE Energy, Inc. (MGreen) is keen to expand its 68-megawatt-alternating current (MWac) solar plant project with Vena Energy in Ilocos Norte. “This is...

You May Also Like


Browsing history makes referring to sites and pages you’ve visited in the past seamless. It’ll help you recall what page you checked out on...


The minute that any question pops into your head, you can simply ask Google. No longer do we have to pour over books and...


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.