The central bank chief reiterated that reducing banks' reserve requirement
was not a means to manage the liquidity in the financial system, which could raise or lower the pace at which consumer prices rise.
In deciding to reduce the reserve requirement
ratios, the Monetary Board reaffirms the BSP's commitment to gradually lessen its reliance on reserve requirements
for managing liquidity in the financial system," it said in a statement.
Espenilla also signaled more reductions on the deposit reserve as he vowed to 'gradually lessen its reliance on reserve requirements
for managing liquidity in the financial system.
issued Circular 983 announcing the reduction of reserve requirement
on repo transactions in support of the comprehensive initiative to develop the domestic local currency debt market.
The cash reserve requirement
for commercial banks remains unchanged at 5%.
The bank said in a statement Sunday that the new reserve requirement
would take effect Monday.
Again, after accounting for its reserve requirement
, the bank receiving the deposit would have excess reserves of $8,100 (see Expansion Stage 2).
With a view to supporting financial stability and by taking into account the latest developments in global markets, the reserve requirement
ratios of foreign exchange-denominated liabilities of banks and financing companies are revised in order to encourage the extension of maturities of non-core liabilities," the central bank said in a statement.
The central bank had raised the lira reserve requirement
half a percent in September and said last month it may raise it to 6% by year-end.
The lowering of the reserve requirement
will also allow banks to get a return on the funds that have been released.
It also raised for the first time in years the reserve requirements
banks have to make for time and savings deposits to 4pc from 2pc, according to the memo.
The Federal Reserve Board announced on October 4, 2005, the annual indexing of the low reserve tranche and of the reserve requirement
exemption amount for 2006.