简体中文
After reviewing the deposit reserve deviation, the central bank, also known as the People’s Bank of China (PBOC), further “averages” the review method for reserve requirement ratio (RRR) to hedge the market fluctuation caused by timing factors.
The central bank on June 3 announced that, since July 15, 2016, assessment base of RMB reserve requirement will be adjusted as arithmetic mean value of end-of-day balance of the general savings during the review period from general savings at the end of review period. Meanwhile, overseas banks participating in offshore CNH businesses submit deposit reserve quarterly, and reserve the CNY deposit of onshore agent banks, with submitted deposit base also increased to arithmetic mean value of end-of-day balance of the participating banks’ reserved savings in previous quarter.
In terms of offshore CNH savings institutions, great decline of overnight interbank lending interest rate in Hong Kong will never happen again after the new rules, which was caused by unwillingness to hold RMB at the end of a quarter in March.
Flatting offshore CNH market fluctuation
Since January, the central bank has executed a normal RRR for offshore CNH savings which have been deposited in domestic banks by the said participating banks overseas, and the time-point amount at the end of a quarter is a benchmark.
Based on data of Treasury Markets Association in Hong Kong, overnight interbank lending interest rate plummeted by 477 bp to -3.7250 percent on March 31. Additionally, overnight deposit interest rate of offshore CNH in Hong Kong also sharply dropped to -16.17 percent, the largest decline rate since the history.
Market commonly believed that March 31 is the first calculation date for submitting the deposit reserve after new policy of the central bank. Institutions for offshore CNH savings even pay money to swap out their CNH savings so as to reduce the submitting amount of deposit reserve, causing the said plummet.
“Due to cardinal number at the time point for review, overseas banks were not willing to hold CNH savings at the end of March, causing overnight interbank lending interest rate to drop 4.77 percentage points to -3.725 percent at the end of March. The average method for review is beneficial to revise the bugs. Therefore, offshore CNH position will not greatly fluctuate at the end of a quarter when facing the assessment, and its interbank lending interest rate will be more stable,” research report of China International Capital Corporation Limited (CICC) believed.
Due to weakening RMB exchange rate, Hong Kong Monetary Authority announced on May 31 that, up to the end of April, offshore CNH savings of Hong Kong reduced 4.8 percent to 723 billion yuan.
CICC also pointed out that although Hong Kong has offshore CNH savings of 700 to 800 billion yuan, those deposited in agent banks are required to be submitted, and the base amount only records several hundreds of billions yuan. The first depostie reserve submission was carried out at the end of March, and the base amount of this round will increase slightly, but newly added scale should be just over 1 billion yuan. At the meantime, CNH savings of Hong Kong further drop to 723 billion yuan in April based on change in offshore CNH scale, hence, the base amount for submission this time is also likely to decline.
More average assessment for deposit reserve
The central bank indicated that this measure further improve the average method to assess deposit reserve, reinforce the management flexibility on financial institutions’ liquidity, and flat the monetary market fluctuation.
Some viewpoints are interpreted as “another way of RRR cut”, which is not persuading. Ji Tianhe, medium term interest rate and exchange rate researcher of Founder Securities, said in the interview that such policy will not impact onshore banks so much, as reform of last year had made the said assessment more flexible, base amount of each bank’s deposit reserve does not change much, and the results will be close no matter by time-point or average methods. “Monthly saving growth of each bank now is about 1 percent, and the deposit reserve is required for submission every ten days. Therefore, the average base amount and the amount at the end of a quarter will be more close to each other under such situation.”
Previously, the central bank made adjustment to the calculation of reserve requirement. Since September 15, 2015, the central bank began to calculate reserve requirement of financial institutes based on average, rather than timing. That is during the maintenance period, the ratio between the arithmetic average of their daily outstanding deposits and the base for reserve requirement assessment shall be no less than required reserve ratio. Meanwhile, to promote financial institutes to operate stably, there is a floor for reserve requirement assessment every day. At the end of each business day during the maintenance period, the ratio between the daily outstanding deposits and the base for reserve requirement assessment can be no less than required reserve ratio, but the deviation should be within (including) one percentage point.
Actually, the central bank, the China Banking Regulatory Commission and the Ministry of Finance in September 2014 jointly issued the notice on the deviation of reserve requirement of commercial banks, requiring their end-of-quarter and end-of-day outstanding deposits shall not deviate largely from the average. Especially, as the requirement for loan-to-deposit ratio was cancelled in 2015, banks see less pressure on attract deposits at the end of month and quarter. The difference between end-of-quarter and end-of-day deposits is relatively small now.
Li Qilin, head of fixed-income research team in Minsheng Securities, told National Business Daily reporter that this time’s adjustment is deposit base. As deposits can reach high at end of month, the adjustment from end-of-month deposit to average monthly deposit will help smooth capital fluctuation, reduce financial institutes’ demands for emergency deposit and enhance their willingness to lend in money market.
As the broad money and renminbi new loans remarkably declined in April compared with the first quarter, market are not optimistic about the financial data for the second quarter. Especially, capital market can easily become volatile at the end of June, which is also the end of the second quarter.
Li Qilin held that to sable capital supply through policy adjustment, the central bank shows intention in stabilizing interest rate. Although there will be macro prudential assessment and replacement of business tax with value-added tax at the end of the quarter, the central bank has obvious intention in stabilizing short-term interest rate under the framework of interest rate corridor. It is expected that there is a high probability that banks will get it through at the end of this quarter.
(APD/XH FINANCE)
