Historical Role Of Deposit Restrain Measures Of China’s And Perfect Suggestion

Commercial banks are the most important financial intermediaries of modern society. One of their most important basic function is absorbing deposits and offering loans by multiple of leveraged operations and maturity transformation, in order to balance the liquidity of the society. The central bank use a series of monetary policy tools to operate deposit money to control the liquidity of commercial bank and the whole society. Because the interest rate between deposit and loan is the initial and most basic source of profits of the commercial bank, n not be ignored on the use of the commercial bank and the liquidity of the social supply. Recent years, the deposit constraints has more and more important influence in the use of the fund in commercial bank and the liquidity of the whole society. The most important and basic function of the commercial bank is to ensure the sufficient funds in the social liquidity. Once the liquidity in not in the reasonable range, the result will have catastrophic impact on commercial banks and the whole society. There are two typical example of the Deposit restrain measure: LDR and legal deposit reserve rate/(Required deposit reserve ratio). The former requires that the lending ability of the commercial banks lending strictly depends on the bank’s ability of deposit absorption. The latter requires commercial banks to pay a certain percentage of deposit reserve to the central bank in accordance with their deposit scale. The restraint measures of commercial Banks’ deposits has played an important role in the financial system in China as a commercial Banks’ liquidity management tools and the government macroeconomic regulation and control tools for stable. With the continuous development of financial innovation in our country in recent years and the financial structure evolves, the limitations of the LDR and the legal deposit reserve rate constraints has been gradually revealed.This article attempts to analyze LDR regulation and the legal deposit reserve ratio beginning from the angle of their historical evolution, characteristics, function, etc; and introduce the negative impact and existing problems of the two; also the applicability and function evolution in our country nowadays; and at last the international practices and the particularity of China’s monetary policy. On the basis of fully realization on their historical function of the restraint measures of deposits, this piece of article tries to combine the current international, domestic monetary and financial situation and perspective analyze its applicability and rationality in current situation and put forward the perfect proposal in the future.