Central Bank of China
PRESS RELEASE Release Date: Oct. 3, 2001




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Monetary Policy Decisions of the Board Meeting

(October 3, 2001)

The Board of the Central Bank of China (CBC) decided today to lower the discount rate, the secured loan rate and the unsecured loan rate all by 25 basis points to 2.5 percent, 2.875 percent and 4.75 percent respectively. The changes will be effective from October 4. The rate cut is seeking to boost the economy, against the background of the weak demand in the external sector and the long-run goal of price stability. The Central Bank encourages banks to reduce their prime lending rates in line with the lower capital costs of theirs and to extend credit to the corporations so as to facilitate business activities.

In addition, the Central Bank cut the required reserve ratio (see attached table) to lower the average required reserve ratio to 5 percent from 6.22 percent, which will increase market liquidity by NT$194.6 billion. If banks hold extra liquidity, the Central Bank will take one-year re-deposits from banks to maintain proper growth of money supply.

From 1998 to 2000, the Central Bank has increased the interest rate paid to banks for 60% of required reserves deposited with the central bank for 3 times to 4 percent from 2.4 percent in order to help banks improve their competitiveness and to reduce private sector's borrowing costs. To act in response to the downward trend of market rates, the Central Bank decided to lower that interest rate to 2.5 percent.

The Central Bank also lowered the marginal required reserve ratio on foreign currency deposits (which began from December 8, 2000) to 5 percent from 10 percent.

All the changes take effect from October 4, 2001.

Table of Required Reserve Ratios of Deposits and Other Debts

(table)[EXCEL][PDF]

Effective from October 4, 2001.