Central bank can still cut reserve requirement by 200 bps, says Diokno
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said on Wednesday there is still room to further cut the reserve requirement by by 200 basis points.
In the virtual Lido forum, Diokno said the Monetary Board has given him the authority to reduce the reserve requirement by 400 bps as one of the measures to address the impact of the coronavirus disease crisis.
"At the start of the crisis, the Monetary Board gave me the authority to cut the reserve requirement by 400 bps. I have already cut it by 200 bps. If I want to further cut by another 200 bps, it can still be done. That's a delegated authority," he said.
Reserve requirements refer to the percentage of bank deposits and deposit substitute liabilities that banks must set aside in deposits with the BSP which they cannot lend out, or where available through reserve-eligible government securities.
Changes in reserve requirements have a significant effect on money supply in the banking system, making them a powerful means of liquidity management by the BSP.
Meanwhile, Diokno shrugged off projections by some quarters that Philippine remittances might shrink by 10 percent this year as many overseas Filipinos have been affected by the COVID-19 pandemic.
"Assuming 10 percent decline, that's still $27 billion," he said.
Remittances last year hit $30.133 billion.
According to government, over 30,000 overseas Filipino workers have been repatriated to the Philippines after they lost jobs due to the virus. Thousands more are expected to arrive in the country.
Diokno expressed optimism that remittances would continue to grow because of business process outsourcing.
He also cited the still strong demand for OFWs, especially health workers.
Diokno urged the Technical Education and Skills Development Authority to focus its training to more construction workers and caregivers instead of bar tenders or beauticians.
He said the Philippines would need more construction workers for its Build, Build, Build infrastructure program.
"Let's not allow this unprecedented crisis go to waste, Let's look at the opportunities," Diokno said. Celerina Monte/DMS
