Central Bank Raises Foreign Exchange Reserve Requirement Ratio by 2 Percentage Points Effective November 15

In a decisive move to manage currency liquidity, the central bank announced that it will raise the foreign exchange deposit reserve requirement ratio for financial institutions by two percentage points, effective November 15. This policy adjustment marks the first such increase in nearly five years, signaling a proactive stance by monetary authorities.

The announcement triggered immediate reactions across financial markets, with the onshore and offshore exchange rates experiencing noticeable volatility and adjustments. Financial analysts noted that the central bank’s intervention was designed to cool down rapid appreciation trends and prevent excessive speculation in the currency market, guiding the exchange rate toward a more balanced level.

By increasing the reserve ratio, financial institutions are required to hold a larger share of their foreign currency deposits in reserve, effectively tightening foreign currency liquidity within the domestic banking sector. Market participants have closely analyzed the policy signal, recognizing it as a targeted macro-prudential tool to curb one-sided market bets.

Experts emphasize that the central bank possesses a diverse toolkit to maintain overall financial stability and prevent disorderly market fluctuations. The timely adjustment underscores the authorities’ commitment to fostering a stable, market-determined exchange rate regime while mitigating systemic risks.

Sources: East Money

Aggregated summary. Original: 东方财富