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Central Bank of the Republic of China

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Financial Conditions (October 2001)

Central Bank of China

PRESS RELEASE Release Date: November 26, 2001




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Financial Conditions (October 2001)

Monetary Aggregates For the month of October 2001, the annual growth rates of the monetary aggregates M1A, M1B and M2, measured on a daily average basis, were -3.17%, 3.31%, and 5.90%, respectively. M1A and M1B growth rose from the figures recorded in the previous month, mainly attributed to the lower base of the corresponding month of the previous year, and a continually narrowed interest spread between time deposits and demand deposits, resulting in a shift of the funds to demand deposits. However, M2 growth went down mainly due to the decelerating growth of loans and investments. For the first ten months of this year, M2 exhibited an average annual growth rate of 5.97%, which was within the target range (5 % to 10%).

Deposits and Loans & Investments At the end of October, the annual growth rate of total deposits in major financial institutions, including monetary institutions and the Postal Savings System, declined to 5.56% from 6.16% at the end of September. The annual growth rate of total loans and investments also moved downward from -0.6% in September to -0.8%, mainly owing to the slowdown of the economy and weak fund demand. If loans and investments extended by life insurance companies and investment and trust companies, major financial institutions' reclassifying nonaccrual loans and writing-off bad loans, as well as funds raised directly from financial markets were taken into account, the total funds raised by non-financial sectors showed an annual growth rate of 2.97% for the month.

Call-loan Rate and Reserve Conditions In spite of the Treasury's short-term borrowing from banks, the issues of government bonds and Treasury bills, as well as the placement of tax in the Treasury account with the Bank, the average overnight call-loan rate for the month continued to trend downward from 3.173% in September to 2.726%. This was mostly influenced by banks' easy fund condition, which resulted from the maturity of the Bank's certificates of deposit, the interest payment on government bonds and the tax redistribution disbursements, as well as the Bank lowering both the discount rate and the rate on accommodations by 25 basis points and the weighted average required reserve ratio of deposits from 6.22% to 5% on October 4. For the month as a whole, the average free reserves of depository institutions and the Postal Savings System were NT$10.4 billion.

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