Web Exclusive

Temporary reserve ratio hike for 4 banks to continue

By Hu Yang (chinadaily.com.cn)
Updated: 2010-12-14 17:14

China's central bank may have extended the temporary reserve ratio hike for four of the six banks for another three months in order to drain liquidity, the 21st Century Business Herald reported Tuesday.

In October, the People's Bank of China ordered six large commercial banks to raise their required reserve ratio by 50 basis points for two months. Four of the six banks -- Industrial and Commercial Bank of China, Construction Bank of China, Agriculture Bank of China, and China Minsheng Bank -- may face an extension of another three months through March 15, according to the report.

The report noted the Bank of China and China Merchants Bank may exempt from the extension of the selective increase, but provided no specific reason.

Related readings:  Central bank keeps watch on prices, liquidity  PBOC keeps watch on prices, liquidity  China to intensify liquidity management: PBOC  Syndicated loans flourishing on high liquidity

The central bank raised the required reserve ratio for all banks by 0.5 percent to 18.5 percent last Friday, which means the reserve ratio for the four targeted banks will stand at a record high of 19 percent.

Lu Zhengwei, chief economist at Industrial Bank, told the newspaper that the ratio hikes were intended to hedge December's 1.5 trillion yuan ($225 billion) liquidity pressure caused mainly by fiscal deposit outflows, international capital inflows and expiring central bank bills.