PBoC again smoothes the RRR calculation: What the banks say

HONG KONG – The Peoples’ Bank of China on Friday evening sent a note out stating that from July 15 2016 the required reserve ratio will be calculated based on the average of the day end deposit balances. It also mentioned that for offshore RMB deposits, the reserves calculations will be based on the average of daily deposit balance.

Natixis says the policy further smooths out the volatiles that banks may face in the reserves placed at the central bank, adding that  day by day, the refinement in should not significantly affect the amount of reserves that banks need to pay. See: http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/3076031/index.html

ANZ Bank says offshore entities should try to reduce their average CNH deposits over Q2 to reduce the RR which will be submitted in July because the CNH submission in July will be calculated based on Q2 average deposits.
“We have seen offshore entities’ making efforts to reduce their April RR at the end of March, when the overnight CNH HIBOR turned negative as a result of banks’ strong orientation of cutting their CNH position.”
ANZ says CNH liquidity should tighten in mid-July due to the submission of the CNH RR, and that, going forward into the medium term, offshore entities should be less willing to take in CNH deposits.
“The change in the CNH RR calculation may reflect the authorities’ purposes of maintaining the relative stability of the RMB by draining CNH liquidity,” ANZ says.  www.natixisresearch.com www.live.anz.com (ATI).