On Saturday (April 1) the People's Bank of China raised interest rates for standing lending facility loans, aimed mainly at small- and medium-sized financial institutions. The PBoC increased the rate for overnight Standing Lending Facility (SLF) loans by 0.2 percentage points to 3.3 percent effective from March 16, it said in a statement on its website. The bank raised the rate for 7-day loans to 3.45 percent and the 1-month rate to 3.8 percent.
The SLF is similar to the Federal Reserve's discount window and the European Central Bank's Marginal Lending Facility. It was started in 2013 and its maximum maturity has been kept at one month or below for the past two years. The PBoC in recent years has used an expanding number of instruments to guide borrowing costs and create an interest-rate corridor. It has increased the frequency of its open-market operations, while officials have been more vocal in signaling policy intentions.
The Peoples Bank of China (PBoC) is mainland China's central bank with the power to control monetary policy via interest rate moves. The PBoC also regulates financial institutions. The objective of the monetary policy is to maintain the stability of the value of the currency and thereby promote economic growth. The monetary policy instruments used by the PBoC include reserve requirement ratio, central bank base interest rate, rediscounting, central bank lending, open market operation and other policy instruments specified by the State Council.
The PBoC sets interest rates for mainland China. Interest rates are always divisible by nine, instead of by 25 as in the rest of the world. The renminbi or yuan is the official currency of the Bank and is legal tender in mainland China, but not in Hong Kong and Macau.
The Bank goes back in various forms to 1948. In the 1980s, as part of economic reform, the commercial banking functions of the PBoC were split off into four independent but state-owned banks. In 1983, the State Council promulgated that the PBoC would function as the central bank of China.
Its central bank status was legally confirmed on March 18, 1995 by the 3rd Plenum of the 8th National People's Congress. In 1998, the PBoC underwent a major restructuring. All provincial and local branches were abolished, and the PBoC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. In 2003, the Standing Committee of the Tenth National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services. The current governor is Zhou Xiaochuan.
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