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China raises banks’ FX reserve requirements for 2nd time this year

BEIJING : China’s central bank said on Thursday it will raise the foreign exchange reserve requirement ratio for financial institutions by 200 basis points (bps), effective from Dec. 15.

The reserve ratio will be increased to 9per cent from 7per cent, the People’s Bank of China (PBOC) said on its website, to strengthen FX liquidity management at financial institutions.

The move would force banks to set aside more of their FX deposits, which stood at US$1.02 trillion at end-Nov, and markets widely believe the decision is intended to slow the yuan’s recent rapid appreciation.

The yuan has risen more than 2per cent against the dollar since late July. In trade-weighted terms it is at its strongest since late 2015.

The PBOC previously raised the FX reserve requirement ratio for financial institutions to 7per cent from 5per cent in June to make it more expensive for banks to hold dollars.

(Reporting by Kevin Yao, Winni Zhou and Beijing newsroom; Editing by David Goodman, Kirsten Donovan)

China raises banks’ FX reserve requirements for 2nd time this year Source link China raises banks’ FX reserve requirements for 2nd time this year

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