BSP set to reduce RRR to zero by 2028, forecasts Taningco

Security Bank Corp.'s chief economist Angelo Taningco expects the Bangko Sentral ng Pilipinas (BSP) to lower reserve requirements for commercial banks to zero by 2028, with another potential reduction in 2026.

On Wednesday, Feb. 26, Taningco told reporters that he anticipates further reductions in the RRR every year until it reaches zero percent before the end of BSP Governor Eli M. Remolona Jr.'s term.

The Monetary Board recently cut reserve requirements across all banks by 200 basis points to five percent effective March 28, following a decision to keep key interest rates unchanged at 5.75 percent.

Taningco forecasts another 200 bps reduction in 2026 and subsequent cuts of 150 bps each in 2027 and 2028, which would bring the RRR to zero.

The gradual reduction is expected to enhance financial intermediation and free up additional funds for banks, supporting economic growth while maintaining inflation control and exchange rate stability.

Since taking office in June 2023, Governor Remolona has already reduced bank reserves from 9.5 percent to five percent within less than two years.