China central bank adds flexibility to reserve requirement rules

China's central bank is revising its reserve requirement rules to make them more flexible for banks to better manage liquidity in the world's second-largest economy as it cools.
China's central bank is revising its reserve requirement rules to make them more flexible for banks to better manage liquidity in the world's second-largest economy as it cools.PHOTO: AFP

BEIJING (Reuters) - China's central bank is revising its reserve requirement rules to make them more flexible for banks to better manage liquidity in the world's second-largest economy as it cools.

Banks can now report a daily reserve requirement ratio (RRR) that is up to 100 basis points below the required level as long as their daily average does not fall under the rate set by the central bank. The new rule is effective Sept 15.

The RRR, which measures the amount of deposits that banks lock up as reserves with the central bank, is currently regulated on a daily basis.