China's central bank to raise forex reserve requirement ratio for financial institutions

China's central bank announced Tuesday that it will raise the foreign exchange reserve requirement ratio for financial institutions from Nov. 15.

The People's Bank of China will raise the foreign exchange RRR for financial institutions by two percentage points to six percent.

The move is set to strengthen the management of forex liquidity, said the PBOC.

China's central bank conducted the third operation of the Securities, Funds and Insurance companies Swap Facility (SFISF) on Tuesday to support the healthy and stable development of the country's capital market.

The operation has a swap term of one year, with the possibility of extension depending on circumstances, according to an announcement released by the People's Bank of China (PBOC) on Monday.

A total of 31 securities and fund companies have submitted applications for the facility, with the amount requested exceeding 100 billion yuan (about 14.89 billion U.S. dollars), the announcement said.

The central bank conducted the previous two SFISF operations in October 2024 and January 2025, with a combined volume of 105 billion yuan (about 15.79 billion U.S. dollars), official data showed.

The PBOC set up the SFISF in October 2024. The tool allows eligible securities, funds and insurance companies to use their assets, including bonds, stock ETFs, and holdings in constituents of CSI 300 Index, as collateral in exchange for high-quality liquid assets from the central bank, such as treasury bonds and central bank bills.

Funds obtained through this facility must be directed exclusively into the capital market for investment in and market-making of stocks and equity ETFs. The facility is designed to improve participating institutions' access to funding and enhance their capacity to increase stock holdings.