BSP begins unwinding pandemic relief measures for MSMEs

MANILA, Philippines — The Bangko Sentral ng Pilipinas reminded universal and commercial banks that they will no longer be allowed to use enterprise loans that stood as an alternative for complying with reserve requirements.

This move marked the central bank’s efforts from pandemic-era relief measures that began with the tightening of interest rates back in May 2022. 

The BSP’s order covered loans lent out to micro, small, and medium-sized enterprises and large enterprises to cushion the impact of the pandemic-induced economic recession on their businesses.

“The unwinding of the temporary relief measure will restore the use of the RR as an instrument for managing liquidity in the financial system in line with the BSP’s broader agenda of enhancing its liquidity management capabilities. It will also simplify the administration of banks’ compliance with the reserve requirement,” the statement read.

That said, the directive moved in concert with the central bank’s reduction in the reserve requirement ratio that will take effect by June 30. 

Thrift, rural and cooperative banks will still be allowed to use the MSME and LE loans to comply with reserve requirements. The caveat for these smaller lenders is only when those loans are fully paid, but not later than December 31, 2024. 

As it is, the BSP said that MSME and LE loans from these small lenders that soured or were extended and renewed will not be eligible as an alternative compliance with reserve requirements. — Ramon Royandoyan