Philippines Banking System: Reserve Requirements

Reserve Requirements

• All banks operating in the Philippines are required to maintain reserves against their deposit liabilities to control the volume of money created by the credit operations of the banking system.

Deposit Substitutes

• A deposit substitute is an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of re-lending or purchasing of receivables and other obligations.

Reserve Ratios

• The Monetary Board may fix and alter the minimum reserve ratios to peso deposits and deposit substitutes, which each bank and/or quasi-bank may maintain, and such ratio shall be applied uniformly to all banks of the same category as well as quasi-banks.
• The Monetary Board is authorized to prescribe and modify the minimum reserve ratios applicable to deposits denominated in foreign currencies.

Reserve Against Unused Balances of Overdraft Lines

• The Monetary Board may establish minimum reserve requirements for unused balances of overdraft lines to facilitate control over the volume of bank credit.

Increase in Reserve Requirements

• The increase in reserve requirements shall be made in a gradual manner and shall not exceed four-percentage points in any 30-day period.

Deposit Function

• The deposit function is performed by bank officials, including tellers, who contribute to the satisfaction of the customer-depositor.
• Modern banks have acquired new methods and mechanized devices to improve service and step up multifarious activities.

Teller Functions

• Teller functions include receiving deposits and paying out checks and other instruments exchanged for cash.
• Teller functions are also performed through electronic devices such as ATMs, phones, and the internet.

Reserve Requirements for Specific Banks

• Universal banks and commercial banks: 6%
• Thrift banks: 5%
• Non-bank financial intermediaries with or without quasi-banking functions: 6%
• Rural banks: 4%

Form and Compensation

• Deposits maintained by financial intermediaries authorized to engage in trust and other fiduciary business with the BSP up to 40% of the regular reserve against peso-denominated common trust funds and regular reserves for TOFA-Others shall be paid interest at 4% per annum based on the average daily balance of said deposits, to be credited quarterly.