China could raise its cash reserve ratio to new highs in 2011
The central government could raise the ratio of reserves it requires banks to hold against their loans to 23 percent in 2011, as it continues to try to curb inflationary credit growth in the financial system, Lu Zhengwei, chief economist at Industrial Bank, said on Tuesday.
The figure would be the highest reserve requirement ratio ever set by a central bank, Lu said.
Zhang Xiaohui, head of Monetary Department of the People’s Bank of China, the country’s central bank, said in an article earlier this year that the ceiling for a central bank’s reserve requirement ratio is 23.5 percent.Read more:
http://cnbusinessnews.co...-rise-to-record-high-2/
I think this is the sixth increase over the last year but it's interesting to observe such an event considering Kenya's reserve ratio has never risen above 20.0% even during 1993. In April 1993 Kenya's reserve ratio was raised from 6.0% to 8.0%, then 10.0% (Jul-93), 12.0% (Oct-93), 14.0% (Dec-93), 16.0% (Feb-94), and finally 20.0% (Mar-94). We briefly discussed the effects of raising reserve requirements in post 11 on the thread below.
http://www.wazua.co.ke/f...aspx?g=posts&t=5467
Here’s a blast from the past! An old Daily Nation paper for 24th September 1993 written by a Francis Makokha titled “CBK cash reserve ratio rises to 12 pc”. An excerpt was as follows:
The Central Bank has raised its cash reserve ratio from 10 per cent to 12 per cent – a move that may deal a severe blow to small commercial banks and financial institutions. At the same time, a senior CBK official predicted yesterday that donors would resume quick disbursement aid within two weeks after the return of Finance Minister Musalia Mudavadi from Washington DC where he will be attending scheduled for next week.
Beginning October 21, all commercial banks will be required to keep 12 per cent of their deposits with the CBK. Any bank with excess holdings above the new legal requirement will earn 35 per cent annual interest on the excess funds. Previously, no interest was paid on such funds.
This is the third time that the CBK has adjusted the cash reserve ratio for commercial banks this year as part of its efforts to mop up an estimated Sh25 billion pumped into the economy last year and early this year. The cash reserve ratio was about six per cent, at the beginning of the year and was raised to about eight percent in the middle of the year. Last month, the CBK raised the requirement to 10 per cent.Click on link below for full article.
http://www.2shared.com/d...VV52CDn/02DN240993.html
This is the article I had alluded to in post 24; the CBK has paid interest on reserves before ... WOW.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden