Peru: Reserve Requirements, GFC

Peru experienced the Global Financial Crisis of 2007-2009 (GFC) in two distinct phases. First, starting in the summer of 2007, record capital inflows to the Peru banking sector contributed to an overheating economy. The Banco Central de Reserva del Peru (BCRP) responded in September 2007 by removing reserve requirements on long-term external credit to promote long-term, rather than short-term, capital inflows. In February 2008, for similar reasons, it began to raise the ordinary minimum reserve requirement on bank liabilities and implemented new marginal reserve requirements on increases in those liabilities. Second, when the collapse of the US investment bank Lehman Brothers in September 2008 exacerbated worldwide liquidity strains, the BCRP reacted by lowering the ordinary reserve requirements to pre-crisis levels and lowering the marginal requirements. In total, the BCRP estimated that the reserve requirement changes injected 2.3 billion soles (USD 752 million) in liquidity, or 0.6% of GDP, between September 2008 and March 2009. Although scholars are divided on the BCRP's success at limiting credit growth during the first phase, they generally view the liquidity provision during the second phase as successful.