MANILA, Nov. 7 (Xinhua) -- The Philippine central bank BSP said on Friday that it will cut the regular reserve requirement on bank deposits and deposit substitutes by two percentage points, starting from Nov. 14.

    The measure is aimed at "preemptively ensuring the proper functioning of the interbank market and guarding against a possible liquidity or credit tightness arising from the global rise in risk aversion," the BSP said in a statement.

    It will bring the regular reserve requirement to 8 percent from10 percent, it added.

    Cutting the reserve requirement, or cash held by the government for depositor protection, is expected to free as much as 60 billion pesos (1.23 billion U.S. dollars), precluding tightness in money supply that may arise from the global credit crunch, said the statement.

    The reduction in the reserve requirement has been a medium-term policy objective of the BSP to lower banks' intermediation costs, and present conditions provide room for a calibrated reduction, according to the central bank.

    Going forward, the BSP will continue to monitor financial and monetary developments, particularly those in the credit market, and act as warranted to shield the financial system from the adverse effects of the global financial crisis, it added.

Special Report: Global Financial Crisis