PBOC Raises Foreign Exchange Reserve Requirement Ratio to 6%
nashnova research
The People's Bank of China will raise the foreign-exchange deposit reserve requirement ratio from 4% to 6% starting November 15, 2026 — forcing banks to lock up more dollars and draining freely tradable FX liquidity, a move that eases depreciation pressure on the yuan.
What exactly changed?
The PBOC is lifting the FX deposit reserve requirement ratio by 2 percentage points, from 4% to 6%.
In plain terms = for every $100 in foreign-currency deposits, banks must now set aside $6 instead of $4 — leaving less FX available for lending or trading.
The new rule takes effect on November 15, 2026.
Why is the PBOC acting now?
The official rationale: "strengthening FX liquidity management at financial institutions."
This means → the central bank sees too much loose dollar liquidity in the system and wants to mop it up.
This reflects concern over near-term yuan depreciation pressure — tightening dollar supply is a standard tool to take the strain off the currency.
What does it mean for markets?
Banks' usable FX positions will shrink immediately, tightening short-term dollar liquidity.
This means → the effective cost of converting yuan to dollars may edge up, and FX lending rates face upward pressure.
In plain terms = the PBOC did not intervene in the exchange rate directly; instead it turned down the tap on dollar supply — a gentler mechanism, but the signal is unmistakable.
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