In order to support the development of the real economy and promote a steady decline in comprehensive financing costs, the people's Bank of China decided to lower the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). In order to increase support for small and micro enterprises and "agriculture, rural areas and farmers", urban commercial banks that do not operate across provinces and agricultural commercial banks whose deposit reserve ratio is higher than 5% will be reduced by an additional 0.25 percentage point on the basis of a 0.25 percentage point reduction in the deposit reserve ratio. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.

The people's Bank of China will continue to implement a prudent monetary policy, avoid flooding, give consideration to internal and external balance, give better play to the dual functions of monetary policy tools in terms of total quantity and structure, maintain reasonable and abundant liquidity, keep the growth rate of money supply and social financing scale basically in line with nominal economic growth, stimulate market vitality, and support financing in key areas and weak links. Create a suitable monetary and financial environment for high-quality development and supply-side structural reform.

The relevant responsible person of the people's Bank of China answered a reporter's question on the reduction of the deposit reserve ratio of financial institutions.

Q: what is the purpose of this reduction??

A:At present, liquidity is at a reasonably adequate level. The purpose of this cut is to optimize the capital structure of financial institutions, increase the long-term stable sources of funds of financial institutions, enhance the ability of financial institutions to allocate funds, and increase support for the real economy. The second is to guide financial institutions to actively use reserve reduction funds to support industries and small and medium-sized enterprises seriously affected by the epidemic. Third, the RRR reduction reduces the capital cost of financial institutions by about 6.5 billion yuan per year, which can help reduce the comprehensive financing cost of the society through the transmission of financial institutions.

AskHow much money will be released by this reserve reduction??

A:The cut totaled about 530 billion yuan in long-term funds. This cut is an across-the-board reduction, with the exception of some corporate financial institutions that have implemented the 5% deposit reserve ratio, a general reduction of 0.25 percentage points in the deposit reserve ratio for other financial institutions. For urban commercial banks that do not operate across provinces and agricultural commercial banks whose deposit reserve ratio is higher than 5%, the deposit reserve ratio will be reduced by an additional 0.25 percentage point on the basis of a 0.25 percentage point reduction, which will help to increase support for small and micro enterprises and "agriculture, rural areas and farmers."

AskWhat are the comprehensive considerations after the reduction of the reserve requirement?

A:The people's Bank of China will continue to implement a prudent monetary policy. First, we should pay close attention to the changes in price trends and maintain overall price stability. Second, we should pay close attention to the adjustment of monetary policy in major developed economies, taking into account internal and external balance. At the same time, we should maintain reasonable and abundant liquidity, promote the reduction of comprehensive financing costs, and stabilize the macroeconomic market.