PBOC official calls for reserve requirements on Yu'ebao
BEIJING, May 5 (Xinhua) – Interbank deposits made by China's money market funds, including Yu'ebao, should be subject to reserve requirements just as traditional bank deposits do, says Sheng Songcheng, head of survey and statistics department at the People's Bank of China (PBOC).
Sheng makes the remarks in an article published Monday on PBOC-run Financial News, saying there have been repeated calls for applying reserve requirements to interbank deposits made by non-deposit-taking institutions, such as money market funds, securities firms, trust firms, financial leasing companies, and banks' wealth management arms.
The central bank official has made similar remarks earlier in late March.
Reserve requirements have been a major tool of China's monetary policy for the central bank to adjust money supply and liquidity.
In Sheng's view, the fact that deposits from Yu'ebao funds are not subject to reserve requirements is the main reason for Yu'ebao's high yields.
Currently, Chinese major commercial banks are required to hand over 20 percent of retail deposits to the central bank as part of the reserve requirements. But most interbank deposits, which offer negotiable interest rates and early withdrawal options, are not subject to reserve requirements.
Anbound Group, a Beijing-based think-tank, says if the PBOC decides to make reserve requirements apply to those interbank deposits, it would tighten liquidity and pull up interest rates. (Edited by Ding Lei, firstname.lastname@example.org)