China, Russia ease bank requirements
China and Russia sought to ease regulatory requirements on their banks amid concerns about their economies.
The People's Bank of China (PBOC) chose to slash banks' reserve requirement ratio (RRR) by 50 basis points to 19.5 per cent, which will reduce the amount of deposits that each lender is required to hold in reserve.
Coming just weeks after China posted its slowest annual growth rate in 25 years, the decision was aimed at providing greater economic stability as officials fret over signs that the world’s second-largest economy is hitting a rocky patch.
The move pushes China further into the kind of easing territory occupied by other major central banks in the West and comes not not long after the PBOC cut interest rates in November for the first time since July 2012.
It will inject roughly $100 billion into the banking system. Last quarter saw the biggest capital outflow from China since 1998.
Further reductions of the RRR are likely. “We expect at least four more reserve ratio cuts in 2015, in view of the prospect for further deceleration in economic fundamentals,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong, told Bloomberg.
Meanwhile, Russia is looking at relaxing regulations on banks hit by months of US and European sanctions.
According to Reuters, Alexei Simanovsky, first deputy governor, said the Bank of Russia was considering loosening rules on how banks calculate the risks associated with certain consumer loans with high interest rates.
Russian banks’ financing and loan-loss provisioning costs shot up last year as sanctions hit their ability to access international capital markets.
The comments came after the central bank came under fire for a surprise interest rate cut in late January. It cut the main lending rate to 15 per cent from 17 per cent only weeks after it had increased the rate from 10.5 per cent in an effort to stem the ruble's collapse. Some analysts said the rate cut raised questions about the bank’s independence from the Kremlin.