BSP thumbs down reduction in thrift banks' liquidity ratio

Reducing the minimum liquidity ratio (MLR) of thrift banks to 16 percent from the current 20 percent is not needed at this time as the industry remains capable of complying with the requirement, the Bangko Sentral ng Pilipinas (BSP) said.

- KEISHA TA-ASAN

While the BSP acknowledged the thrift banking industry’s contribution to economic growth through its lending activities, the central bank deems it appropriate to maintain the MLR of 20 percent.

“This ensures that covered banks have adequate liquid assets to withstand potential stress events while continuing to meet their clients’ funding needs,” the central bank said.

“A reduction of the MLR to 16 percent, which was implemented during the pandemic as a regulatory relief measure, is not warranted at this time,” it said.

According to the BSP, the MLR for the thrift banking industry has consistently stayed well above the minimum requirement.

As of May 2024, the industry reported over P35 billion in additional loanable funds. On an individual bank level, most banks are operating with liquidity ratios significantly exceeding the 20-percent requirement.