12-03-2014, 08:59 AM
12-03-2014, 02:25 PM
Reducing RRR helps liquidity risk, but not for credit risk which is the biggest risk now facing the banking system in China.
13-03-2014, 11:26 AM
In general this is correct but the 2nd order of liquidity easing also helps credit risk because banks are generally more eager to lend ie lower lending standards. That is why generally credit spreads tighten during easy money period and widened during tighter monetary periods.