Thrift banks to request lower MLR after RRR cut

THRIFT BANKS will ask the Bangko Sentral ng Pilipinas (BSP) to decrease the minimal liquidity ratio (MLR) for the business to 16%, because the reserve requirement ratio (RRR) minimize takes impact later this month.

“I’m positive they are going to be open to that. Particularly now that we have now a 0% [RRR] already. So, let’s see. We’ll proceed to most likely request from them (the BSP),” Chamber of Thrift Banks (CTB) President and CARD SME Financial institution Vice-Chairperson Mary Jane A. Perreras instructed reporters on the sidelines of the CTB Common Membership Assembly on Friday.

Final yr the BSP rejected the thrift banking business’s name to scale back the MLR, saying there was no want. It famous the 20% MLR was “applicable,” because it ensures that thrift banks “have enough liquid belongings to face up to potential stress occasions whereas persevering with to satisfy their purchasers’ funding wants.”

“Throughout the pandemic it was at 16%. Now they’ve introduced it again to twenty%. So hopefully they’ll convey it again even when little by little,” Ms. Perreras mentioned.

In April 2020, the BSP lowered the MLR for stand-alone thrift banks, rural banks and cooperative banks to 16% from 20% to assist these lenders meet purchasers’ demand for funds through the pandemic.

This regulatory reduction measure expired on the finish of 2022, bringing the MLR again to twenty%.

Ms. Perreras mentioned the BSP may rethink its earlier stance as a result of anticipated enhance in mortgage quantity after the RRR minimize takes impact.

The RRR for thrift lenders will likely be lowered by 100 foundation factors to 0%, efficient March 28. The RRR is the portion of reserves that banks should maintain onto to make sure they’ll meet liabilities in case of sudden withdrawals. When a financial institution is required to carry a decrease reserve ratio, it has extra funds to lend to debtors.

“That (RRR minimize) will enhance the quantity of loans, hopefully. As a result of there will likely be extra liquidity that will likely be out there. And we’re nonetheless additionally hoping that after the RRR is lowered to zero, the MLR may very well be lowered subsequent,” she mentioned.

Ms. Perreras mentioned a discount in MLR would additional enhance lending.

“We’re hoping that possibly that may be subsequent. As a result of that’s a lot better for us, particularly for banks to have the ability to lend extra… I’m positive they’ve the reason why they’re retaining it at 20%. However we hope that they might additionally rethink our request,” she mentioned.

THRIFT LOANS
In the meantime, Ms. Perreras mentioned loans disbursed by thrift banks may hit round P900 billion this yr, pushed by the RRR minimize and elevated lending to small companies and the agriculture sector.

“I feel this progress will proceed this yr. Particularly that now, we have now a zero-reserve requirement (ratio). So, that mortgage portfolio, we anticipate that to be rising as a result of we have now extra liquidity to do extra loans outdoors,” she mentioned.

In 2024, thrift banks disbursed loans price P770 billion, Ms. Perreras mentioned in a speech on Friday. This was round 15% greater than the P667.63-billion loans in 2023.

She instructed reporters that the sector’s web earnings and belongings may develop by 6-7% this yr.

Nonetheless, cybersecurity points proceed to pose a threat for the sector.

“I feel a lot of the banks are experiencing this, however due to the quite a few options suppliers which are going to be very useful for all of the banks, not solely the large banks however the large and the small banks, I feel we are going to attempt to actually combat this off,” Ms. Perreras mentioned.

The thrift banking business’s whole belongings grew by 6% to P1.1 trillion in 2024 from P1.04 trillion in 2023.

“Whole capital reached P174 billion up by 10.7% from P157 billion. Capital adequacy ratio (CAR) is a powerful 17.88%, very a lot above the ten% minimal required CAR. Nonperforming mortgage ratio remained manageable at 6.66%,” Ms. Perreras added.

This yr, the CTB is rising loans for small companies, in addition to agricultural corporations, that are sometimes affected by pure calamities.

“We now have a whole lot of disasters and often the affected sector is agriculture. So, whereas we’re nonetheless engaged on growth and making this a much bigger sector. We will even take a look at the opposite sectors just like the small and medium enterprises,” she mentioned. — Aaron Michael C. Sy