BEIJING (Reuters) – China’s central bank issued rules on Friday on calculating banks’ reserve requirement ratios (RRR) to make the regime more flexible for banks to better manage liquidity.

Calculating bank’s reserve requirement ratios will be based on the arithmetic average of their daily outstanding deposits, according to the rules published on the central bank’s website.

Currently, calculating RRR is based on each bank’ outstanding deposits at the date of assessment, the central bank said.

The revision will help “further improve the assessment of deposit reserve requirement, increase the flexibility of liquidity management of financial institutions and smooth currency market volatility”, the central bank said.

The rules will take effect from July 15.

In September, the central bank revised reserve requirement rules to allow banks to report a daily RRR that is up to 100 basis points below the required level as long as their daily average does not fall under the rate set by the central bank.

Calculating reserve requirements of overseas banks that have deposited their yuan funds in domestic banks will be based on the average of their daily outstanding deposits of the previous quarter, according to the rules.

China’s central bank has started implementing a reserve requirement ratio on Chinese banks operating offshore with yuan deposits, in a bid to stem speculation in the yuan and manage money flowing in and out of the country.

(Reporting by Kevin Yao; Editing by Jacqueline Wong)

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