Taiwan Central Bank Raises Minimum Liquidity Requirements

The Central Bank of the Republic of China (Taiwan) raised the minimum liquidity ratio for financial institutions to 10% from 7%.  The move will come into effect from 1 October 2011, and is designed to bring the statutory liquidity ratio in line with where most banks are currently operating (i.e. not in response to any rise in banking system risks).  The latest figures from the central bank indicated an overall liquidity ratio of 32.5% at the end of May.  The move is expected to strengthen risk management in the banking system over the longer term.

Taiwan's central bank recently raised the discount rate 12.5 basis points to 1.875% at its June meeting this year, commenting that "Although the nation's inflation remains more stable than in most other countries, we have decided to maintain the pace in rate hikes to help control the public's prospective attitude toward consumer prices,".  Taiwan reported annual consumer price inflation of 1.7% in May, up slightly from 1.3% in April this year, meanwhile the government is forecasting 2011 inflation of 2.1%.

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