China To Normalise Reserve Requirement Ratio

By Samantha Tan Chiew Ting BEIJING, Jan 18 (Bernama) -- China's central bank, People's Bank of China (PBOC), will normalise the reserve requirements on deposits placed by overseas financial institutions at their branches in the country from Jan 25, 2016, Xinhua News Agency reported. "Overseas financial institutions do not include central banks and other similar agencies such as official reserve managers, international financial organisations and sovereign wealth funds," it quoted a statement from PBOC. It said the PBOC set the reserve requirement ratio (RRR) for such institutions at zero in December 2014, but the ratio will now be "normalised". The move will not affect domestic yuan liquidity, PBOC said. It said setting a normal RRR for overseas financial institutions will "help subdue cyclical movement of cross-border yuan funds and guide overseas financial institutions in strengthening their management of yuan liquidity". The policy will increase the cost of short-selling offshore yuan and depress arbitrage based on the spreads of offshore and onshore yuan, China International Capital Corp, a Chinese investment bank, was quoted as saying. Offshore yuan has weakened sharply in past few days. In early January, it dipped below 6.7 against the US dollar. -- BERNAMA