The people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio).

Headshot source ｜ visual China

In order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). In order to increase the support for small and micro enterprises and “agriculture, rural areas and farmers”, for urban commercial banks without inter provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25 percentage point. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.

The people’s Bank of China will continue to implement a prudent monetary policy, avoid flooding, take into account internal and external balance, give better play to the dual functions of the total amount and structure of monetary policy tools, maintain reasonable and sufficient liquidity, maintain the growth rate of money supply and social financing scale, basically match the economic growth of the same name, stimulate market vitality, and support financing in key areas and weak links, Create a suitable monetary and financial environment for high-quality development and supply side structural reform.

The relevant person in charge of the people’s Bank of China answered reporters’ questions on reducing the deposit reserve ratio of financial institutions

Q: what is the purpose of this RRR reduction?

A: at present, liquidity is at a reasonable and sufficient level. The purpose of this RRR reduction is to optimize the capital structure of financial institutions, increase the long-term stable capital sources of financial institutions, enhance the capital allocation capacity of financial institutions, and increase support for the real economy. The second is to guide financial institutions to actively use the RRR reduction funds to support industries and small, medium and micro enterprises seriously affected by the epidemic. Third, the RRR reduction reduces the capital cost of financial institutions by about 6.5 billion yuan per year, which can promote the reduction of social comprehensive financing cost through the transmission of financial institutions.

Q: how much capital will be released from this RRR reduction?

A: the RRR reduction released a total of about 530 billion yuan of long-term funds. The RRR reduction is comprehensive. Except for some corporate financial institutions that have implemented the 5% deposit reserve ratio, the deposit reserve ratio is generally reduced by 0.25 percentage points for other financial institutions. For urban commercial banks without inter provincial operation and rural commercial banks with a deposit reserve ratio higher than 5%, on the basis of reducing the deposit reserve ratio by 0.25 percentage points, an additional 0.25 percentage points will be reduced, which will help to increase support for small and micro enterprises and “agriculture, rural areas and farmers”.

Q: what are the comprehensive considerations after the RRR reduction?

A: the people’s Bank of China will continue to implement a prudent monetary policy. First, pay close attention to changes in price trends and maintain overall price stability. Second, pay close attention to the adjustment of monetary policy in major developed economies, taking into account internal and external balance. At the same time, maintain reasonable and sufficient liquidity, promote the reduction of comprehensive financing costs and stabilize the macro-economic market.

The people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio).

Headshot source ｜ visual China

In order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). In order to increase the support for small and micro enterprises and “agriculture, rural areas and farmers”, for urban commercial banks without inter provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25 percentage point. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.

The people’s Bank of China will continue to implement a prudent monetary policy, avoid flooding, take into account internal and external balance, give better play to the dual functions of the total amount and structure of monetary policy tools, maintain reasonable and sufficient liquidity, maintain the growth rate of money supply and social financing scale, basically match the economic growth of the same name, stimulate market vitality, and support financing in key areas and weak links, Create a suitable monetary and financial environment for high-quality development and supply side structural reform.

The relevant person in charge of the people’s Bank of China answered reporters’ questions on reducing the deposit reserve ratio of financial institutions

Q: what is the purpose of this RRR reduction?

A: at present, liquidity is at a reasonable and sufficient level. The purpose of this RRR reduction is to optimize the capital structure of financial institutions, increase the long-term stable capital sources of financial institutions, enhance the capital allocation capacity of financial institutions, and increase support for the real economy. The second is to guide financial institutions to actively use the RRR reduction funds to support industries and small, medium and micro enterprises seriously affected by the epidemic. Third, the RRR reduction reduces the capital cost of financial institutions by about 6.5 billion yuan per year, which can promote the reduction of social comprehensive financing cost through the transmission of financial institutions.

Q: how much capital will be released from this RRR reduction?

A: the RRR reduction released a total of about 530 billion yuan of long-term funds. The RRR reduction is comprehensive. Except for some corporate financial institutions that have implemented the 5% deposit reserve ratio, the deposit reserve ratio is generally reduced by 0.25 percentage points for other financial institutions. For urban commercial banks without inter provincial operation and rural commercial banks with a deposit reserve ratio higher than 5%, on the basis of reducing the deposit reserve ratio by 0.25 percentage points, an additional 0.25 percentage points will be reduced, which will help to increase support for small and micro enterprises and “agriculture, rural areas and farmers”.

Q: what are the comprehensive considerations after the RRR reduction?

A: the people’s Bank of China will continue to implement a prudent monetary policy. First, pay close attention to changes in price trends and maintain overall price stability. Second, pay close attention to the adjustment of monetary policy in major developed economies, taking into account internal and external balance. At the same time, maintain reasonable and sufficient liquidity, promote the reduction of comprehensive financing costs and stabilize the macro-economic market.