Fri, Jan 04, 2019 - Page 12 News List

Chinese central bank to adjust select banks’ reserve requirement ratios

Bloomberg

The People’s Bank of China on Wednesday said it would adjust the calculation of some banks’ reserve ratios, a move aimed at boosting the effects of a previous easing step as the Chinese economy slows.

Loans to small and micro-sized enterprises with a credit line of less than 10 million yuan (US$1.45 million) would qualify for targeted reserve requirement ratio cuts, up from the previous standard of 5 million yuan, a statement on the bank’s Web site said.

The central bank said that the move could “expand the coverage” of a previous targeted cut to required reserve ratios (RRR), and guide financial institutions to better meet the financing demand of small and medium-sized enterprises.

The adjustment could release up to 400 billion yuan of liquidity, China International Capital Corp (中國國際金融) said.

The tweak would boost net interest margins by one basis point and lift profit by 0.8 percent, assuming that all listed Chinese banks qualify for the 1.5 percentage point targeted RRR cut under the change, the firm said.

At the most, the policy could add 770 billion yuan of liquidity, although the amount of funding released would probably be lower than that estimate, said Ming Ming (明明), head of fixed-income research at Citic Securities Co (中信證券) in Beijing.

The announcement would be followed by other measures to ease the funding squeeze ahead of Lunar New Year, including RRR cuts and loans offered via the Medium-term Lending Facility, Ming said.

The step signals that the bank has continued with easing in small policy tweaks while avoiding significant moves.

China last month dropped the word “neutral” from its monetary policy stance and said it would strike “an appropriate balance” between tightening and loosening this year.

Senior central bank officials pushed back against interpretations of its recent moves as signaling a significantly looser policy.

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