BEIJING China punished some banks, including Bank of China (3988.HK), for lending too much, after a surge in new loans this year increased inflationary pressures, sources said on Wednesday citing central bank figures.
The People's Bank of China (PBOC) had also told other lenders, including Industrial & Commercial Bank of China (1398.HK) (601398.SS), CITIC Bank (0998.HK) (601998.SS) and China Everbright Bank EVRBK.UL to increase their reserve requirement ratio by 0.5 percentage point.
The punishment, effective for three months, will be either extended or intensified if these banks do not ease their lending pace, the sources told Reuters.
Chinese banks lent 1.1 trillion yuan ($161.1 billion) in the first two weeks of January, including 500 billion yuan by the top four state lenders, the sources told Reuters, citing data from the central bank.
"Overly fast credit growth will add to such pressure," the sources cited the central bank as saying, referring to consumer inflation.
"Once CPI exceeds 2 percent, China's real deposit rate will be negative, and add pressure to take action on interest rate policy," the central bank was quoted as saying.
The sources said some Chinese banks lent more than half of their quota for all of 2010 in the first two weeks and were lending excessively to new projects.
They said China's top leaders, who are checking the lending data every day instead of at the end of each month, were not happy with the fast pace.
Zhu Baoliang, a government economist, said China's annual consumer inflation accelerated "significantly" in December from 0.6 percent in the year to November.
The central bank anticipated China's trade surplus would widen after a faster-than-expected 17.7 percent annual growth in exports in December and increase pressure for it to suck up excess liquidity, the sources said.
China last week raised banks' reserve requirement for the first time since June 2008 to absorb liquidity, and has been guiding up the rates on short-term central bank bills in an effort to drain excess cash from the financial system.
The PBOC told banks they must follow a reasonable rhythm of credit growth in 2010, and try to extend loans in an even manner, avoiding abnormal swings between quarters and months, China's state radio reported on Wednesday.
The central bank has instructed state lenders to extend 80 percent of their loans to projects that had already started and 70 percent of the loans from smaller banks should go to such investment, the sources added.
It also ordered banks to step up efforts to control their risks, particularly those arising from lending to the projects backed by local governments.
By the end of September, firms backed by the local governments had borrowed an equivalent of 240 percent of their fiscal revenues, the sources said.
The following is a breakdown of news loans at the top four banks in the first two weeks of January:
BANK: YUAN LOANS:
Industrial and Commercial Bank of China 164 billion
Agricultural Bank of China 107 billion
Bank of China 167 billion
China Construction Bank Corp. 62 billion
(Reporting by Beijing newsroom; Editing by Jon Loades-Carter)