Central bank lowers reserve requirement to boost lending

By March 30, 2015

In an effort to boost lending and economic activity, Peru’s central bank has lowered the legal reserve requirement in soles from 8% to 7.5%.

The central bank also lowered its central bank reserves, the amount national banks must leave in the central bank, from 1% to 0.7%. By freeing up soles-denominated capital in national banks, the move is expected to inject $150 million into the Peruvian economy. The new reserve requirement takes effect April 1.

This is the central bank’s second decrease in reserve requirements this month. Two weeks ago, the central bank lowered the reserve requirement from 8.5% to 8% while it maintained its key interest rate in an effort to defend the nuevo sol, which has lost over 10% of its value in the last six months. Meanwhile, dollar-denominated deposits in Peru have grown by almost $1 billion, with higher rates seen in commercial bank accounts.

The central bank reported that soles-denominated loans grew at an annualized rate of 17.6% in February, while dollar-denominated loans are down 1.7%. All lending is down compared to previous years, with February’s growth the lowest in five years.

Over $13 billion in capital has been freed up in Peru since June 2013 by lowering reserve requirements.


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