China's central bank demands liquidity management

The People's Bank of China released a circular on Monday morning requiring banks to strengthen management over liquidity.

The circular said commercial banks must pay close attention to the liquidity situation in the market.

The circular was dated June 17, but was released on Monday. It came after a liquidity crunch when the cost of benchmark short-term funding climbed to all-time high on June 20.

Commercial banks must take various factors into consideration, set margins in advance and keep sufficient reserves, the circular said.

Overall liquidity in the financial system is at a reasonable level, it said. Interest rates for short-term funds in China hit high levels last week while the money crunch pushed up interbank lending rates.