Economy

Beijing plans bank reserve reform: report

(Agencies)
Updated: 2011-01-05 13:46

People walk past the headquarters of the central bank of the People's Republic of China in Beijing, in this February 16, 2009 file photo. [Photo/Agencies]

SHANGHAI - China's central bank is planning to begin this year a monthly review of banks' required reserves as part of wider monetary policy reform, the official China Securities Journal reported on Wednesday.

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Banks will be subject to different required reserves ratios depending on their role in the economy, the newspaper said, citing unnamed sources.

Banks may also receive lower interest income for reserves beyond the levels set by the central bank as the central bank seeks to reduce interest costs, it said.

The central bank has established a set of formulas which will be used to calculate the required reserves for individual banks, it added.

The new rules will be implemented progressively and the first nine months of the year will be considered an adjustment period for commercial banks, the Securities Journal said.

The central bank will adjust required reserves ratios for banks based on overall liquidity conditions in the country, which in turn will be measured based on factors such as the deviation between economic growth and lending growth as well as consumer price inflation, the newspaper said.

The central bank has been working to contain money supply and credit growth back in an effort to curb inflation, which is running at its fastest in 28 months.

The central bank raised interest rates twice and increased banks' reserve requirements six times last year.