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Smaller banks to have more room for lending

CHINA'S small and mid-sized commercial banks will be allowed more leeway in lending, the country's banking regulator said in Beijing on Saturday, in its latest effort to ease credit for the slowing economy.

The loan-deposit ratio of small and mid-sized lenders can exceed the required level "by a proper margin," said the China Banking Regulatory Commission on its Website.

The regulator prohibits Chinese commercial banks from lending out more than 75 percent of their total deposits to avoid liquidity crises. Saturday's statement didn't reveal if the ceiling will be raised for large lenders too.

The move to expand leeway is part of the measures the commission announced on Saturday to give stronger credit support to the economy impacted by the global financial turmoil.

All financial institutions should improve credit services to facilitate a rapid economic growth "with resolution and practical actions," it said.

The regulator also urged Chinese banks to increase credit support for small enterprises and rural sectors.

Lenders will be encouraged to lend for company mergers and to offer loan restructuring to enterprises which have financial or managerial problems caused by the global downturn, said the regulator.

Through loan structuring, banks can cut the burden of borrowers by extending loan maturities, reducing or remitting debts and other favorable adjustments.

The regulator said all the moves should be made based on strict risk control.

Chinese banks granted 476.9 billion yuan (US$70 billion) of loans in November. That was more than four times the level in November 2007, official data show.

China has cut lending rates sharply since mid-September and unveiled a 4-trillion-yuan fiscal stimulus package in early November to rejuvenate the economy.

Economist Cheng Siwei said last Thursday the economy grew about 8 percent during the fourth quarter of 2008, down from 9 percent in the third quarter and 10.4 percent in the first half.


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