Foreign banks in China will be required to hold yuan in reserve beginning next week, according to the central bank. This comes as the People’s Bank of China (PBoC) seeks to stabilise the currency, which has been hit by capital flight.
Foreign banks in China have enjoyed a zero reserve requirement ratio up until now. But starting next week, they will be subjected to similar rules as domestic banks.
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The PBoC has yet to specify the percentage of reserves to be retained. Major Chinese banks currently have a ratio of 17.5 percent.
The PBoC said that this new regulation was to "prevent financial risk and protect financial stability", adding that the rules will "strengthen liquidity management".
This comes as the yuan weakens on worries over a slowdown in China’s economy, which has caused capital flight.
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