China will require foreign financial institutions in the country to hold yuan in reserve, the central bank said Monday as it seeks to stabilise the currency, which has been hit by capital flight.
Until now, overseas banks in China have been set a reserve requirement ratio — the amount of depositor funds they must keep aside — of zero.
From next week they will be subject to similar rules as domestic lenders, the central People’s Bank of China (PBoC) said in a statement, without specifying the percentage to be retained. Major Chinese banks currently have a ratio of 17.5 percent.
The PBoC said the move aimed to “prevent financial risk and protect financial stability”, according to a statement on its website. It added the rules will “strengthen liquidity management”. Read more