Philippines' reserve cut to boost liquidity, no CPI impact-c.bank

* Reserve cut to release $2.35 bln to financial system

* C.bank says cut to offset impact of reserve restructuring

* Says move not inflationary

By Rosemarie Francisco

MANILA, Feb 6 (Reuters) - The Philippine central bank will release about 100 billion pesos ($2.35 billion) into the financial system when a 3-percentage-point cut in banks' required reserves takes effect in April, but the move should not be inflationary, a senior official said.

While the move reflects a de facto policy easing, Diwa Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas (BSP), said the funds were likely to be returned to the central bank via its short-term special deposit account (SDA) window and its reverse repurchase, or overnight borrowing, facility (RRP).

The reserve cut, which has been flagged since last year and was approved by the central bank last Friday, is aimed at offsetting the cost to banks from reforms to simplify the reserve requirement structure.

The 3 percentage point cut will take banks' required reserves to 18 percent from April. Guinigundo said every 1 percentage point cut in required reserves was estimated to release around 30-35 billion pesos into the system.

"It's actually smaller than what is required to offset impact on non-remuneration (of reserves) and exclusion of cash in vault in financial intermediation," Guinigundo told Reuters over the weekend regarding the amount released from the cut.

Asked about the impact of the reserve cut on inflation, he said: "Nothing. This will be absorbed by SDA and RRP."

Placements with the BSP's short-term SDA facility climbed back to a record 1.7 trillion pesos in the week ending Jan. 13 against 1.68 trillion pesos the previous week. The facility pays slightly higher than the 4.25 percent RRP policy rate.

PROFIT BOOST?

Under the reforms, two types of bank reserves -- liquidity and statutory -- will be merged into one. The central bank will also stop paying interest on these funds, and exclude some types of holdings from eligible reserves.

The Philippines has been one of few central banks around the world still paying interest on banks' reserves, and the policy move will help buoy the BSP's sagging finances.

The central bank lost 23.6 billion pesos in the nine months to September 2011, against losses of 36.7 billion a year earlier, the BSP website shows. The BSP posted a loss of 59 billion pesos in 2010, its second biggest annual loss since the central bank's restructuring in the mid-1990s.

Asked whether the reserve cut would help BSP finances, Guinigundo said: "Yes, but that is not the main reason for the reforms. It is to make the RR a more effective tool of monetary policy by simplifying compliance and enforcement."

The BSP currently pays 4 percent per annum on up to 40 percent of deposits kept by banks as statutory reserves.

At its last rates meeting on Jan. 19, the central bank cut its policy rate by 25 basis points to 4.25 percent to boost domestic growth amid a global economic slowdown.

($1 = 42.6150 Philippine pesos) (Reporting by Rosemarie Francisco; Editing by Richard Pullin)