MANILA – The Bangko Sentral ng Pilipinas (BSP) said pandemic-related relief measures allowing banks’ lending to micro, small and medium enterprises (MSMEs) and large enterprises (LEs) as reserve requirement (RR) compliance will be withdrawn starting July 1.

“The unwinding of the relief measure is set to coincide with the reduction in the reserve requirement ratios by 30 June 2023 to facilitate the transition, supporting the banks’ continued compliance with the RR and managing friction costs related to the policy adjustment,” it said in a statement on Wednesday.

The BSP said universal and commercial banks (U/KBs) would no longer be allowed to use MSME and LE loans as alternative RR compliance starting next month.

On the other hand, thrift banks (TBs), rural banks (RBs), and cooperative banks (coop banks) will still be allowed to use their outstanding MSME and LE loans as of June 30 as part of its RR compliance “until such loans are fully paid, but not later than 31 December 2025.”

“The outstanding MSME and LE loans of thrift, rural, and cooperative banks that subsequently become past due or non-performing, or are extended, renewed, or restructured, shall no longer be eligible as alternative compliance with the RR,” the BSP said.

It said new MSME and LE loans to be approved by banks after June 30 this year would not be eligible as alternative RR compliance.

“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,” it added.

The use of MSME and LE loans of entities affected by the virus-induced pandemic as RR compliance was made to, among others, help ensure that economic activities remain robust even during the pandemic.

The amount of loans covered by these regulatory relief measures reached PHP336 billion in 2022.

The bulk of the loans, amounting to PHP263.1 billion, is accounted for by loans extended to MSMEs, while the balance of about PHP72.9 billion consists of loans to LEs. (PNA)