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China may order new bank loan reserve ratio -media
September 7, 2010 / 8:01 AM / 7 years ago

China may order new bank loan reserve ratio -media

BEIJING, Sept 7 (Reuters) - China may order its banks to set aside 2.5 percent of their total loans as reserves to counter bad debt risks, Caixin magazine reported on Tuesday.

Chinese banks are already required to put aside 150 percent of non-performing loans as provisions. The Caixin report did not clarify whether the new reserve requirement would be in addition to or a replacement of the existing requirement.

“The proposal is still under internal discussion. Once implemented, it will have limited impact on big banks, but will exert big pressure on smaller lenders,” Caixin cited sources close to the banking regulator as saying.

The move will restrict banks’ scope for lending and better reflect their bad loan levels, it cited an unnamed industry analyst as saying in a report on its website (www.caing.com).

The country’s leading banks have already set aside reserves that are roughly in line with what regulators may demand of them.

The Industrial and Commercial Bank of China (1398.HK), the world’s largest lender, had a reserve-to-loan ratio of 2.39 percent at the end of June, while Bank of China (3988.HK) had 2.26 percent and China Construction Bank (0939.HK) 2.49 percent. (Reporting by Langi Chiang and Simon Rabinovitch; Editing by Jacqueline Wong)

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