PBoC Cuts Reserve Ratio

The People's Bank of China lowered the reserve requirement ratio (RRR) for banks by 50 bps on December 6th 2021, the second cut this year, aiming to promote a steady decline in financing costs.

The RRR for big banks now stands at 11.5% and the weighted average RRR for financial institutions at 8.4%.

The RRR reduction will not apply to financial institutions with existing RRR of 5%.

The cut will be effective from December 15th and will release CNY 1.2 trillion in long-term liquidity to boost economic growth while lowering capital costs for financial institutions by around CNY 15 billion.

The cut however, does not mean a change in monetary policy, the central bank noted.