S. Korea's central bank to boost reserve ratio

South Korea's central bank announced Thursday to hike the reserve ratio on deposits from the current 5 percent to 7 percent, which is the first such move since February 1990, in a bid to reduce the money supply and stabilize real estate prices.

According to the decision, which was made in a meeting of the central bank's Monetary Policy Committee, the reserve ratio on money market deposit accounts and demand deposits will be boost from the current 5 percent to 7 percent. On long-term deposits, the policymakers approved to cut the ratio to zero from 1 percent.

The new ratio will be applied from Dec. 23.

The reserve ratio refers to the percentage of customer deposits that banks are required to set aside in cash. A rise of the ratio usually causes in more difficulty for local commercial banks to provide loans, which is believed to be an effective way to reduce the overall money supply and stabilize property prices.

Following the central bank's decision, the Finance Ministry said it will support the decision.

Source: Xinhua