The policy of “downgrading” is coming to an end!

The central mom is so hard, big Friday night, but still working overtime to release the announcement, the full cut 0.25 percentage points.

Some financial institutions said that this downgrade, about 500 billion Yuan of funds released.

As we all know, the deposit reserve ratio, a monetary policy tool – the

A theoretical maximum of 100% means that banks become safes without any lending function.

The theoretical minimum value is 0, which means that depository institutions can lend out all the money they have on hand without losing a single cent, provided that other national financial regulatory policies are met.

At the beginning of 2018, the average legal reserve ratio of depository financial institutions in China was 14.9%, and after this reduction, it became 7.6%, which has been reduced by an average of 1.46 percentage points per year over the years, and at this rate, this reserve ratio will be reduced to 0 in a few more years down the road.

On the other hand, it is conceivable that maintaining a certain level of reserve ratio (above the theoretical lower limit) is necessary for the goal of maintaining financial stability and counteracting financial risks, and, at present, the reserve ratio for small banks has already been reduced to 5.0% – and in this reduction, it is also deliberately emphasized that “excluding financial institutions that have implemented a 5% deposit reserve ratio”.

According to the central government’s rhetoric, we can roughly assume that the 5% reserve requirement ratio is the actual lower limit for the implementation of the reserve requirement ratio as currently perceived by China’s financial regulatory system – so presumably, the reserve requirement ratio, as a policy tool, is nearing the end of its useful life in China.

As we all know, for the past 30 years in China, the reserve ratio has been a “particularly powerful” policy in the hands of China’s central government to restrain commercial banks, as it is directly related to the level of broad money supply in the society as a whole, and is therefore crucial to the tightening of financial conditions in the society as a whole.

However, this is such a good and powerful monetary policy tool, but in the past years, we basically have not heard that the central banks of the United States, Europe, the United Kingdom or Japan, to adjust the reserve ratio, what is the reason?

Also, if anyone wants to know how the stock market performed after our central mom cut, someone listed a table, which I offer to you.



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