China Retools Bank Reserve Ratio, Casting Doubt on RRR Cuts
Central bank planning new 'Macro Prudential Assessment' system
Officials look beyond reserve ratio for liquidity management
As investors continue to grapple with China’s economic slowdown, regulators may be taking away an old standby for monetary easing.
The required reserve ratio for commercial banks, a tool long used to add or remove liquidity, will increasingly be used instead as a lever for enforcing financial stability. That’s according to a People’s Bank of China announcement on Dec. 29 describing a new Macro Prudential Assessment system, or MPA.