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China said to plan reform in banks' reserve requirement
By Zhang Fengming |
January 5, 2011, Wednesday
|
Online Edition
Online Edition
CHINA is reported to plan to begin this year a monthly review of banks' mandatory reserves in a bid to reform its monetary policy.
Banks will have varying ratios this year for the required reserves depending on the role the banks play in the nation's economy, the China Securities Journal said today.
Banks may also get lower interest payment from the central bank for the reserves they set aside as the central bank tries to cut interest costs, the report said.
Hu Xiaolian, deputy governor of the People's Bank of China, said in December that the central bank may introduce a range of varied reserve ratios among its package of monetary policies, including interest rate and open market operations in 2011. Hu didn't specify on how reserve ratios may vary, for instance adjusting it monthly or quarterly. "Varying reserve requirement should be improved to more efficiently target liquidity," she said.
China shifted its monetary policy from relatively loose to prudent in 2011.
The central bank raised the reserve requirements on all banks six times in 2010 and also raised the interest rates twice last year to mop up liquidity and increase the financing cost.
Banks face a record high reserve requirement of 18.5 percent currently. The one-year benchmark deposit rate rose to 2.75 percent while the one-year benchmark lending rate gained by the same 25 basis points to 5.81 percent.
Banks in China extended 7.4 trillion yuan of loans in the first 11 months of 2010, meaning that the 7.5 trillion yuan loan quota for 2010 is very likely to exceed.
The high liquidity was partly accused of having shored up China's inflation to a 28-month high in last November to 5.1 percent, bringing China's actual interest rate to a negative 2.35 percent (5.1-2.75) as taking into account of the rising cost of living.
Banks will have varying ratios this year for the required reserves depending on the role the banks play in the nation's economy, the China Securities Journal said today.
Banks may also get lower interest payment from the central bank for the reserves they set aside as the central bank tries to cut interest costs, the report said.
Hu Xiaolian, deputy governor of the People's Bank of China, said in December that the central bank may introduce a range of varied reserve ratios among its package of monetary policies, including interest rate and open market operations in 2011. Hu didn't specify on how reserve ratios may vary, for instance adjusting it monthly or quarterly. "Varying reserve requirement should be improved to more efficiently target liquidity," she said.
China shifted its monetary policy from relatively loose to prudent in 2011.
The central bank raised the reserve requirements on all banks six times in 2010 and also raised the interest rates twice last year to mop up liquidity and increase the financing cost.
Banks face a record high reserve requirement of 18.5 percent currently. The one-year benchmark deposit rate rose to 2.75 percent while the one-year benchmark lending rate gained by the same 25 basis points to 5.81 percent.
Banks in China extended 7.4 trillion yuan of loans in the first 11 months of 2010, meaning that the 7.5 trillion yuan loan quota for 2010 is very likely to exceed.
The high liquidity was partly accused of having shored up China's inflation to a 28-month high in last November to 5.1 percent, bringing China's actual interest rate to a negative 2.35 percent (5.1-2.75) as taking into account of the rising cost of living.
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