RRR Calculation to Change

Designed to avoid the quarter-end cash crunch.

WSJ: PBOC to Change Methodology to Assess Reserve-Requirement Ratio
The People’s Bank of China said that, starting from July 15, the reserve-requirement ratio level will be calculated based on the average level of deposits during a certain period rather than the total at the end of the period. Onshore deposits held by offshore banks will have the reserve requirement set according to the average level of daily outstanding deposits in the previous quarter, the PBOC said.

The change will help stabilize liquidity movement, but the overall impact on the liquidity level won't be significant, economists said. The new methodology will decrease the reserve requirement put on commercial banks at the end of quarter and increase committed reserve at the start of the quarter, economists said.

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