19 July 2019

Deposit reserve rules seen applicable for Yu’E Bao, paper says

Alibaba Group’s popular internet finance product Yu’E Bao should be put under deposit reserve regulations due to the fund’s investments in negotiated bank deposits, China Securities Journal cited Sheng Songcheng {盛松成}, the statistics chief at the People’s Bank of China (PBoC), as saying. Nominally, Yu’E Bao is a type of money-market fund. But unlike most of its international counterparts which invest most of the funds in short-term bonds, 95 percent of Yu’E Bao money is invested in negotiated bank deposits, building the case for reserve rules, Sheng noted. He claimed that exemption of Yu’E Bao from deposit reserve requirement has created unfair competition for bank deposits and contributed the most to the product’s high annualized yield. Reserve rules can help prevent liquidity risks brought by large-scale redemption and improve the effectiveness of PBoC’s monetary policy, Sheng was quoted as saying.

– Contact HKEJ at [email protected]



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