Banks' low excess reserve ratios........>

CHINA PRESS: Banks' low excess reserve ratios could increase volatility in

interbank market liquidity and so reduce banks'  willingness to lend, the China

Securities Journal warned in a report Wednesday. Banks' excess reserve ratio

fell to only 1% in the middle of August, which was a main reason for recent

tight liquidity, the report noted. One principle of the deleveraging campaign is

that the PBOC will have a greater tolerance for a low excess reserve ratio. 

This means liquidity volatility will continue over the long term unless the

central bank's foreign exchange purchase position increases sharply or the PBOC

injects a large amount of liquidity, such as via a reserve requirement ratio

cut, the report argued. Given the prospect of continued liquidity volatility,

banks need to improve their management of liabilities and liquidity as soon as

possible. (China Securities Journal)