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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
Bloomberg business news

Understanding the Plunge in China’s Markets

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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.