Central Banks

Philippine central bank governor says he wants to lower reserves that banks must hold

Key Points
  • Philippine central bank governor Benjamin Diokno said he plans to slash the country's reserve requirement ratio from the current 18% to a single digit before he steps down.
  • The ratio affects the amount of money banks must hold onto and, therefore, what they have to loan.
Philippines central bank governor wants to cut RRR rates

The Philippine central bank plans to relax in the coming years an important rule governing the amount of reserves that commercial banks must hold, according to its governor, Benjamin Diokno.

That rule is the reserve requirement ratio, which affects the amount of money banks must hold onto and what they have to loan. The ratio currently stands at 18% in the Philippines — one of the highest in the region, Diokno told CNBC's Mandy Drury on Friday at the Asian Development Bank's annual meeting in Fiji.

He added that he plans to slash the ratio to a "single digit" before the end of his term. Diokno's term as central bank governor ends in mid-2023.

Philippine central bankers are scheduled to meet and decide on monetary policy on May 9. Analysts at Citi wrote in a Friday note that they expect the central bank, Bangko Sentral ng Pilipinas, to hold its benchmark rate steady at 4.75%.