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PBOC to  Raise Banks’ Reserve Ratios
World Economy

PBOC to Raise Banks’ Reserve Ratios

China’s central bank said some banks will be forced to lock away more reserves, a move that may contain credit growth after advances by smaller lenders jumped in January. Some banks no longer meet criteria for preferential reserve requirement ratios and will have those levels increased, the People’s Bank of China said Friday in a statement. Prior to the announcement, Bloomberg said that some lenders will face a higher ratio as officials seek to limit the risks associated with last month’s jump in credit. The PBOC said its action wasn’t driven by the speed of lending. The central bank also said adjustments to banks’ reserve requirement ratios will be made from Feb. 25, according to the PBOC. In 2014, the PBOC introduced preferential reserve requirement ratios for banks whose loans to the agricultural sector or to small companies exceeded certain thresholds in relation to their overall lending. Since then, bad loans at Chinese banks have been piling up as economic growth weakened to the slowest pace in a quarter century.

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