Web Exclusive

China plans stronger role for reserve ratio

By Hu Yang (Xinhua)
Updated: 2010-12-24 16:58

China's central bank is planning to implement a dynamic adjustment on differentiated reserve ratios for certain financial institutions in a bid to further strengthen monetary rule, the National Business Daily reported Friday. The plan is under final revision.

The report said the People's Bank of China (PBOC) will require higher reserve ratios for financial institutions with high risks and low capital adequacy ratio, and the interest rates for the reserves may be reduced to as low as zero percent. The move is aimed to control credit from the source.

Related readings:  Reserve ratio may rise to record high  Temporary reserve ratio hike for 4 banks to continue  China to raise bank reserve ratio by 50 points  China to raise reserve ratio by 50 basis points

Hu Xiaolian, deputy governor of the PBOC, said in a recent meeting China has set lower 2011 targets for both credit volume and growth than in 2010. If the banks with higher-than-standard reserve ratios still can not contain their loan growths, the regulator will further strengthen the ratio tool on them.

The PBOC applied temporary three-month reserve ratio hikes for six banks in October and last week extended the hike for four of the six banks another three months. The four banks are Industrial and Commercial Bank of China, Construction Bank of China, Agriculture Bank of China, and China Minsheng Bank.