Cash banks keep with PBOC to be reduced
Print Edition
CHINA aims to cut the proportion of cash that commercial banks must keep with the central bank, the banking regulator said yesterday, signaling further monetary loosening.
The China Banking Regulatory Commission did not say when cuts in banks’ reserve requirement ratios would be made, but it is the third time in as many months that China has signaled a cut in RRRs, which would free up more cash for lending needed to shore up growth.
The CBRC did, however, qualify its comments, saying RRR reductions would be available to those banks whose lending to small firms and the farm sector warranted the reward. It did not elaborate.
The People’s Bank of China also signaled yesterday that it would keep credit supply ample by letting China’s main money market rate fall again this week.
The CBRC also said China will further enhance regulations on its shadow banking system after financial regulators launched a joint crackdown on interbank borrowing.
The regulator said it will improve management of loan-to-deposit ratios — a regulatory requirement that limits bank loans based on deposits.
Although the economy is stable, the CBRC said that downward pressures are relatively significant, reflecting imperfect financing structures, inefficiencies in finance allocation and consumption, and difficulties with small and medium-sized enterprises financing.
The regulator also said it will continue to support buyers of affordable housing and first-home buyers as well as SMEs amid the economic slowdown.
The shadow banking system is worth 27 trillion yuan (US$4.3 trillion), equivalent to nearly one fifth of the domestic banking sector’s total assets, according to the Chinese Academy of Social Sciences.
Other than traditional bank loans, shadow banking refers to unregulated credit, which is provided by trust companies and other lenders such as pawn shops.
However, Oversea-Chinese Banking Corp said China’s total leverage ratio in the shadow banking system is still below that in most advanced economies.
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