The Bangko Sentral ng Pilipinas (“BSP”) has updated its regulatory framework on bank reserves through BSP Circular No. 1229, Series of 2026, with specific focus on how reserve positions are computed and how penalties are enforced in cases of reserve deficiency. The Circular introduces amendments to the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).
First, as to the computation of reserve positions, the Circular strictly defines reserve period as a seven-day week, starting on a Friday and ending on a Thursday, including weekends, public special/legal holidays, non-banking days, declared half-day holidays, and days when there is no clearing. For any public special/legal holidays, non-banking days, unexpected declared non-banking days, declared half day holidays, and days when there is no clearing, the reserve position will be calculated based on its balance at the close of the business day immediately preceding the same.
Second, the Circular clarifies the mechanics of how reserves are actually measured. A bank’s required reserve target for the current week is computed based on its total reservable liabilities, such as deposits and deposit substitutes, from the prior week. Meanwhile, available reserves are calculated based on the current week’s figures, primarily consisting of the bank’s deposits in the Demand Deposit Account with the BSP, as well as other alternative modes of compliance. Ultimately, a bank’s reserve position is determined by simply subtracting the prior week’s required reserve from the current week’s available reserve.
Third, regarding the penalties for reserve deficiencies, if a bank’s reserve falls below the required minimum, it shall pay the BSP one-tenth of one percent (1/10 of 1%) on the amount of deficiency. Nonetheless, the BSP allows banks to offset a deficiency occurring on one or more days of the reserve week against excess reserves it may hold on other days of the same reserve week.
Lastly, the Circular imposes penalties for “Chronic Reserve Deficiencies.” In cases where a bank shall have net reserve deficiencies for two consecutive periods, the bank shall be denied the credit facilities of the BSP. Further, the Monetary Board may limit or wholly prohibit the erring bank from initiating new loans or investments, as well as prohibit the declaration of cash dividends.
In conclusion, by tightening the computation window and instituting sanctions, including the suspension of certain privileges for chronic violators, BSP Circular No. 1229, Series of 2026, ensures that financial institutions maintain robust reserve buffers to safeguard the banking system.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Cloie T. Tapel is an Associate at GVES Law.