ID :
204446
Tue, 08/30/2011 - 23:44
Auther :
Shortlink :
http://m.oananews.org//node/204446
The shortlink copeid
China's decision to widen reserve ratio further tightens liquidity
By Kim Young-gyo
HONG KONG, Aug. 30 (Yonhap) -- China's decision to widen the range of deposits to be held in reserve will further tighten liquidity in the country, experts said Tuesday.
The central People's Bank of China (PBOC) said in a circulated memo it will impose the reserve requirement ratio (RRR) additionally on so-called "margin deposits," or collateral deposited by customers for letters of credit and other guarantees.
The decision came as the world's No. 2 economy continues to face high inflationary pressures boosted by the robust economic growth and excess liquidity.
The official bank reserve requirement ratio is currently set at 21.5 percent for big banks.
"The decision to impose RRR on margin deposits no doubt has a significant impact on interbank liquidity conditions," said Barclays Capital.
"Applying the same 21.5 percent RRR ratio to existing total margin deposits of 4.4 trillion yuan (US$690 billion) will lead to a roughly 900 billion drain in liquidity."
The British investment bank expected the additional reserve ratio requirement for margin accounts will have a much greater impact on smaller banks, which are already the main borrowers in the interbank market due to their generally higher loan-to-deposit ratios, than big state-owned banks.
China's CPI rose to a 36-month high of 6.5 percent in July, driven mostly by food prices, which jumped 14.8 percent from a year earlier.
In the first seven months of the year, the index increased to 5.5 percent despite the country's tightening moves.
In a battle against soaring inflation, the PBOC has raised the benchmark interest rate three times this year while increasing the amount of money banks must keep in reserves six times.
HONG KONG, Aug. 30 (Yonhap) -- China's decision to widen the range of deposits to be held in reserve will further tighten liquidity in the country, experts said Tuesday.
The central People's Bank of China (PBOC) said in a circulated memo it will impose the reserve requirement ratio (RRR) additionally on so-called "margin deposits," or collateral deposited by customers for letters of credit and other guarantees.
The decision came as the world's No. 2 economy continues to face high inflationary pressures boosted by the robust economic growth and excess liquidity.
The official bank reserve requirement ratio is currently set at 21.5 percent for big banks.
"The decision to impose RRR on margin deposits no doubt has a significant impact on interbank liquidity conditions," said Barclays Capital.
"Applying the same 21.5 percent RRR ratio to existing total margin deposits of 4.4 trillion yuan (US$690 billion) will lead to a roughly 900 billion drain in liquidity."
The British investment bank expected the additional reserve ratio requirement for margin accounts will have a much greater impact on smaller banks, which are already the main borrowers in the interbank market due to their generally higher loan-to-deposit ratios, than big state-owned banks.
China's CPI rose to a 36-month high of 6.5 percent in July, driven mostly by food prices, which jumped 14.8 percent from a year earlier.
In the first seven months of the year, the index increased to 5.5 percent despite the country's tightening moves.
In a battle against soaring inflation, the PBOC has raised the benchmark interest rate three times this year while increasing the amount of money banks must keep in reserves six times.
