The Monetary Board approved the reduction in the reserve requirement rate for bonds issued by banks/QBs to three (3) percent as part of its commitment to contribute to deepening of the local debt market. This rate is lower than the required reserves of other debt instruments issued by banks such as long-term negotiable certificates of time deposits which is currently at four (4) percent.
The lower bank reserves on bond issuances is expected to reduce the bond issuers’ intermediation cost that could be passed on to the holders of such securities. The adjustment in the required reserves for bonds complements the BSP’s earlier policy issuance streamlining the rules and requirements for the issuance of debt instruments by banks/QBs. These initiatives are intended to incentivize banks/QBs to tap the domestic bond market as part of its liquidity management.
The new reserve requirement ratio shall take effect on the reserve week beginning 1 November 2019.