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The PBC Decided to Adjust the Risk Reserve Requirement on Financial Institutions' FX Forward Sales to 20 Percent
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Category：Legislative Updates
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Subject：Macro-economy ; Finance
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Source：PBC
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Publish Date：08-17-2018
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Since the beginning of this year, the foreign exchange market has been generally a stable. Based on market supply and demand, the RMB exchange rate has moved in both directions with greater flexibility. Market expectations have remained basically stable, and the cross-border flow of capital and foreign exchange supply and demand have been broadly balanced. Recently, due to trade frictions and changes in the international currency market, the foreign exchange market has showed signs of pro-cyclical fluctuations. In order to prevent macro financial risks, facilitate sound operation of financial institutions, and strengthen macro-prudential management, the People's Bank of China (PBC) has decided to adjust the risk reserve requirement on financial institutions' FX forward sales from 0 to 20 percent, effective from August 6, 2018. In the next step, the PBC will continue to strengthen the monitoring of the foreign exchange market, and adopt effective measures for counter-cyclical adjustments as necessary, so as to maintain market stability and keep the RMB exchange rate basically stable at an adaptive and equilibrium level.
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