Tags: China | Reserve Requirement | Banks | Deposits

China Said to Plan Waiving Reserve Requirement for Some Deposits

Thursday, 25 Dec 2014 03:06 PM

China plans to temporarily waive a requirement for banks to set aside reserves for some deposits, people with knowledge of the matter said, highlighting efforts to boost lending amid a slowdown of the world’s second-largest economy.

Commercial lenders won’t be required to set aside reserves for the savings that they hold for non-deposit-taking financial institutions, the people said. The waiver is part of planned changes to how banks’ loan-to-deposit ratios are calculated, said the people, who asked not to be identified as they weren’t authorized to discuss the plan publicly.

The waiver is seen as another move to replace a universal reserve-requirement ratio cut that People’s Bank of China needs to boost credit and bolster the economy. Concerned that a broad reduction might send out a strong easing signal and bring turmoil to stock market, the PBOC has added liquidity by stealth at least four times in the past four months.

Chinese stocks rose the most in three weeks. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the largest lenders, advanced at least 3 percent after China Business News and Market News International reported the waiver earlier.

This waiver follows a planned loan-to-deposit rule change reported last month that would let banks classify savings they hold for non-deposit-taking financial institutions as deposits, a government official briefed on the matter said in November.

Chinese banks are allowed to lend a maximum of 75 percent of deposits, and required to set aside 20 percent as reserves.

The change may add 7 trillion yuan ($1.1 trillion) of money will be classified as deposits, according a November report by Huang Jie, Beijing-based analyst at China International Capital Corp. Huang also wrote, before reports about the waiver, that the PBOC may cut reserve ratios twice as a result of the change in calculating loan-to-deposit ratios.

The central bank may cut banks’ required reserve ratio by a total of 1 percentage point in the first half, according to economists surveyed by Bloomberg from Dec. 18-23.


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China plans to temporarily waive a requirement for banks to set aside reserves for some deposits, people with knowledge of the matter said, highlighting efforts to boost lending amid a slowdown of the world's second-largest economy.Commercial lenders won't be required to...
China, Reserve Requirement, Banks, Deposits
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2014-06-25
Thursday, 25 Dec 2014 03:06 PM
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