PBOC to cut commercial banks' reserve requirement ratio

The Chinese central bank announced Sunday that it will cut the cash amount required to be reserved in commercial banks by 50 basis points starting July 5, a measure to facilitate targeted lending to small and micro enterprises.

The fund, to be released through cutting the reserve requirement ratio in the five largest State-owned banks and 12 joint-stock commercial banks, could reach nearly 500 billion yuan ($76.9 billion), as the People’s Bank of China, the central bank, estimated in a statement on its website.

This part should be used “to support the market-oriented debt-to-equity swap projects, and to leverage the same amount of private capital participating in the investment”, according to the statement.

Another 200 billion yuan -- to be freed from postal savings banks, city and non-county rural commercial banks, and foreign banks -- will be lent to small and micro enterprises to lower their financing costs, it said.

Financial institutions’ activities in both of the two ways will be supervised by the PBOC’s macro prudential assessment framework, a set of tightened regulatory standards to prevent systemic financial crisis, the statement said.