The central bank cuts its RRR across the board! For the first time this year, about 1 trillion yuan was released

　　Chinanews client, Beijing, July 9th (Reporter Li Jinlei) "Mother Yang" shot, and the RRR was reduced across the board.

　　On July 9, the People's Bank of China decided to lower the deposit reserve ratio of financial institutions by 0.5 percentage points on July 15, 2021 (excluding financial institutions that have implemented a 5% deposit reserve ratio).

After this reduction, the weighted average deposit reserve ratio of financial institutions was 8.9%.

Data map: People's Bank of China.

Photo by China News Agency reporter Zhang Xinglong

The RRR cut releases about 1 trillion yuan in long-term funds

　　The central bank said that

the

RRR cut

is a comprehensive

RRR cut. Except for some county-level legal person financial institutions that have implemented a 5% deposit reserve ratio, other financial institutions generally lower the deposit reserve ratio by 0.5 percentage points, and the RRR cut releases about 1% of long-term funds. Trillion yuan.

　　The main reason for not lowering the deposit reserve ratio of some financial institutions is that the 5% deposit reserve ratio is currently the lowest among financial institutions. Maintaining this low level is conducive to financial institutions' support for the real economy and their own steady operation.

This is the first RRR cut in 2021.

　　The last time the RRR cut was in April 2020, when the central bank decided to target small and medium-sized banks to reduce the RRR by 1 percentage point, and at the same time lowered the interest rate on excess deposit reserves of financial institutions.

　　Prior to the current RRR cut, the country had already issued a clear signal.

　　The executive meeting of the State Council held on July 7 decided that in view of the impact of commodity price increases on the production and operation of enterprises, it is necessary to maintain the stability of monetary policy, enhance effectiveness, and apply RRR cuts in a timely manner on the basis of not engaging in flood irrigation. Monetary policy tools have further strengthened financial support for the real economy, especially small, medium and micro enterprises, and promoted a steady decline in overall financing costs.

Data map: Bank staff count currency.

Photo by China News Agency reporter Zhang Yun

Why is the RRR cut?

　　The central bank stated that the purpose of this RRR cut is to optimize the capital structure of financial institutions, improve financial service capabilities, and better support the real economy.

　　First, while maintaining reasonable and abundant liquidity, it should enhance the capital allocation capabilities of financial institutions to create a suitable monetary and financial environment for high-quality development and supply-side structural reforms.

The second is to adjust the financing structure of the central bank, effectively increase the long-term stable funding sources for financial institutions to support the real economy, and guide financial institutions to actively use the RRR cut funds to increase support for small and micro enterprises.

The third is that the RRR cut has reduced the capital cost of financial institutions by about 13 billion yuan per year, and the transmission of financial institutions can promote the reduction of social comprehensive financing costs.

　　Dong Ximiao, chief researcher of China Merchants Finance, told Chinanews.com that the prices of some commodities have continued to rise this year, and some small and micro enterprises are facing operating difficulties such as rising costs.

With the implementation of the transfer of profits to the real economy, bank interest margins have shown a narrowing trend.

Especially small and medium-sized banks, limited by the high cost of debt, the interest margin has dropped significantly.

Under such circumstances, timely implementation of RRR cuts will provide banks with long-term, stable and low-cost funds, which will increase the liquidity of the banking system while reducing bank funding costs, which will help increase the willingness of banks to serve small, medium and micro enterprises and individual industrial and commercial households. And ability.

A view of Ningbo Port.

Photo by Shen Yingjun

What is the impact?

—— Favor the real economy.

　　Wen Bin, chief researcher of China Minsheng Bank, told a reporter from Chinanews.com that the LPR has been unchanged for 14 consecutive months. After the RRR cut, the cost of debt of financial institutions will decrease. The release of long-term funds will help further reduce corporate financing costs. , Especially small and micro enterprises benefit more.

　　Dong Ximiao believes that after the RRR cut, banks will have more liquidity, lower capital costs, and will increase their willingness and ability to provide credit.

For companies, it will be easier to obtain loans from banks, loan interest rates are expected to further decline, and financing costs are lower.

——Does it affect the property market?

　　Wen Bin believes that the main purpose of the RRR cut is to support the development of the real economy, especially small and micro enterprises, which has little to do with the property market.

At present, the property market regulation policy still insists on “no speculation in housing and housing” and implementation of policies based on the city. Liquidity will not flow into the real estate market due to RRR cuts, because the country is also strengthening supervision and inspections of consumer loans and business loans flowing into the property market. Prevent the illegal flow of funds into the property market.

　　Dong Ximiao also pointed out that after the RRR cut, the central bank will continue to strengthen guidance and restraint on commercial banks through MPA assessment and window guidance to ensure that the funds released by the RRR cut flow to key areas and weak links of the national economy.

Therefore, it will be difficult for the RRR cut funds to flow into the real estate market.

——Does it affect the stock market?

　　In Dong Ximiao's view, for the stock market, the RRR cut sends a signal to maintain a reasonable and sufficient liquidity, which helps stabilize market expectations and confidence, and is conducive to the healthy and sustainable development of the stock market.

Data map: RMB.

Photo by Li Jinlei

The orientation of prudent monetary policy has not changed

　　Does the RRR cut mean a change in the orientation of prudent monetary policy?

　　The central bank pointed out that the orientation of prudent monetary policy has not changed.

When responding to the epidemic in 2020, the People's Bank of China insisted on implementing a normal monetary policy. After May, the intensity gradually turned to normal. In the first half of this year, it has basically returned to the normal state before the epidemic.

The RRR cut is a routine operation after the monetary policy returns to normal. A part of the funds released will be used by financial institutions to return the maturing medium-term loan facility (MLF), and part of the funds will be used by financial institutions to make up for the tax in mid-to-late July. The liquidity gap caused by the peak period will increase the proportion of long-term funds of financial institutions, and the total liquidity of the banking system will remain basically stable.

　　The central bank stated that my country’s economy is currently stable and improving. The People’s Bank of China insists on the stability and effectiveness of the monetary policy, adheres to the normal monetary policy, and does not engage in flooding.

　　Wen Bin believes that the RRR cut does not mean a shift in monetary policy. It is not a signal of easing. The RRR cut is to maintain a reasonable abundance of liquidity and create a good currency, credit, and interest rate environment for the real economy.

(Finish)