Banks will have to set aside a larger share of foreign currency deposits from November 15. The PBOC is raising the requirement from 4% to 6%; the percentage is not a charge deducted from depositors’ accounts.
The People’s Bank of China (PBOC) will raise the reserve requirement on financial institutions’ foreign currency deposits from 4% to 6%. Its November 3, 2026 announcement says the two-percentage-point increase takes effect on November 15. The central bank says the aim is to strengthen foreign exchange liquidity management at financial institutions.
The 6% ratio specifies the share of foreign currency deposits banks must set aside; it does not determine the interest paid to depositors.
How much more will banks set aside?
According to China Daily’s report, commercial banks must hold a specified share of foreign currency deposits in reserve. With deposits unchanged, raising the ratio from 4% to 6% means a bank must hold 50% more in reserve, or one and a half times the previous amount.
| Item | Current requirement | From November 15 |
|---|---|---|
| Deposits subject to the ratio | $100 million | $100 million |
| Reserve ratio | 4% | 6% |
| Required reserves | $4 million | $6 million |
In the example, the bank must set aside another $2 million against the same deposits. The depositor’s $100 million balance does not need to be reduced to meet that requirement. The table uses hypothetical amounts, not an actual bank balance sheet or completed transfer.
According to a Reuters calculation using official foreign currency deposit data, banks could have roughly $24 billion less available once they set aside the additional reserves. The estimate concerns the new ratio’s possible effect, not an outflow recorded on November 3. The PBOC did not announce a total amount. If foreign currency deposits change, the required reserves will change too.
What could change for the yuan?
Marco Sun, chief financial market analyst at MUFG China, told Reuters he sees the move as a response to strong yuan appreciation. In his view, the PBOC wants to reduce the dollars banks can use, slowing the yuan’s rally and discouraging expectations of continued appreciation. The central bank said only that it wanted financial institutions to manage foreign exchange liquidity better.
ANZ senior China strategist Zhaopeng Xing told Reuters he expects the decision to have a mainly symbolic effect. Xing says companies have been converting more foreign currency into yuan, leaving an excess supply of foreign currency. He does not expect the extra reserves to absorb that surplus. The yuan’s future direction remains uncertain.
Reuters reported that the onshore yuan weakened by as much as 0.37% after the announcement, reaching 6.6728 per dollar. The price was observed during the session, not at the close. When the dollar/yuan quotation rises, buying one dollar requires more yuan: the Chinese currency has weakened.
The rates a bank offers customers can differ from market prices. A customer’s exchange costs depend on the bank’s bid–ask spread and any transaction fees. The PBOC decision does not set a new exchange rate or fee for customers.
PBOC reverses its 2023 reserve-ratio cut
According to Reuters, the PBOC cut the foreign exchange reserve ratio in September 2023 to curb rapid yuan losses and capital outflows. It is now raising that ratio. The PBOC did not say how long the new ratio would remain in place or what dollar/yuan level would prompt another change.
Separately, the China Foreign Exchange Trade System’s daily fixing, authorized by the PBOC, was 6.7150 yuan per dollar on November 3. Banks use the daily fixing as a reference for currency trading; they will use the 6% ratio to calculate required reserves. Our October 26 yuan-fixing report explains how the reference is set and why it can differ from market prices.
The PBOC’s Chinese announcement gives the same ratio and implementation date for foreign currency deposits. The central bank announced no general change in yuan deposit reserves, new retail interest rate or target dollar/yuan rate. It has not specified individual banks’ costs or how they might pass those costs to customers.
