BANK reserve requirements will be lowered "substantially" this year, with further cuts likely in 2025, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said on Wednesday. "We're considering it. We've discussed the timing of it. I would say it's going to happen this year," he told reporters in a briefing on Wednesday. "We will reduce reserve requirements substantially this year, and then there may be further reductions by next year." Remolona has previously said that the reserve requirement ratio (RRR) — the percentage of deposits that banks have to set aside and not lend out — could be cut by 450 basis points (bps) to 5.0 percent from 9.5 percent. When asked if it is still possible on Wednesday, he replied that the "idea is to reduce the reserve requirements in a substantial way." Reducing the RRR will release funds that can be directed toward productive activities, boosting economic growth. However, Remolona noted that the impact on the economy won't be immediate as "markets are not deep and liquid [and] we take account of those lags." "We're trying to improve the liquidity of the markets to shorten those lags. But that's an effort that will take some time," he added. BSP Assistant Governor Zeno Abenoja, meanwhile, said some of the liquidity may be directed to government securities and equities while a portion may remain as bank reserves, including deposits with the BSP. "So there is expectation that the volume of operations may increase over the near term as the banks prepare to deploy these funds productively into their fund, invest it or put it in their loan portfolio," he explained. "But in the near term, the volume of the entire operations, including the BSP bills, may expand to help manage this liquidity that will be released to the system. That's how we view ... what could happen over the near term." In June last year, the BSP ordered a 250-basis point cut in the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions to 9.5 percent from 12.0 percent. That for digital banks was lowered by 200 bps to 6.0 percent, while those for thrift banks and rural banks/cooperative banks were cut by 100 bps to 2.0 percent and 1.0 percent, respectively.