Central bank: cut the reserve requirement by 0.5% and release long-term funds of about 1.2 trillion yuan.

[notice] 2021 SMM South China Nonferrous Metals Industry Annual meeting will be held in Guangzhou!

The people's Bank of China issued a notice saying that in order to support the development of the real economy and promote a steady decline in comprehensive financing costs, the people's Bank of China decided to lower the deposit reserve ratio of financial institutions by 0.5 percentage points on December 15, 2021 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.4%.

The people's Bank of China will continue to implement a prudent monetary policy, insist on stability, avoid flooding, take into account internal and external balance, and maintain reasonable and abundant liquidity. We will keep the growth rate of money supply and the scale of social financing basically in line with the nominal economic growth rate, strengthen cross-cyclical adjustment, make overall planning for the convergence of macro policies this year and next, and support small and medium-sized enterprises, green development, and scientific and technological innovation. Create a suitable monetary and financial environment for high-quality development and supply-side structural reform.

The relevant responsible person of the people's Bank of China answered a reporter's question on the reduction of the deposit reserve ratio of financial institutions.

1. Does this cut mean a change in the orientation of prudent monetary policy?

A: the orientation of prudent monetary policy has not changed. The RRR cut is a routine operation of monetary policy, and some of the funds released will be used by financial institutions to repay maturing medium-term loans to facilitate (MLF), and some will be used by financial institutions to supplement long-term funds to better meet the needs of market players. The people's Bank of China adheres to the normal monetary policy, maintains the continuity, stability and sustainability of the policy, and does not engage in flooding, so as to create a suitable monetary and financial environment for high-quality development and supply-side structural reform.

2. What are the considerations for this reduction?

A: the purpose of this cut is to strengthen cross-cycle regulation, optimize the capital structure of financial institutions, enhance the capacity of financial services, and better support the real economy. First, while maintaining reasonable and abundant liquidity, we should effectively increase the long-term and stable sources of funds for financial institutions to support the real economy, and enhance the ability of financial institutions to allocate funds. The second is to guide financial institutions to actively use reserve reduction funds to increase support to the real economy, especially small and medium-sized enterprises. Third, this cut will reduce the capital cost of financial institutions by about 15 billion yuan per year, which can help reduce the comprehensive financing cost of the society through the transmission of financial institutions.

3. How much money will be released this time?

A: this reduction is an across-the-board reduction. Except for some county corporate financial institutions that have implemented the 5% deposit reserve ratio, the deposit reserve ratio has generally been reduced by 0.5 percentage points for other financial institutions. At the same time, considering that most financial institutions participating in the targeted reserve reduction assessment of inclusive finance have reached the assessment criteria such as supporting agriculture and supporting small (including individual industrial and commercial households), the policy objectives have been achieved. The relevant financial institutions uniformly implement the most favorable deposit reserve ratio, so that a total of about 1.2 trillion yuan of long-term funds will be released this time.