May 16, 2012 / 4:31 AM / in 6 years

UPDATE 1-China has no plan to change bank loan ratio-CBRC

* No plans to change to loan-to-deposit ratio, CBRC vice chairman says

* CBRC examining volatility in bank lending patterns

* Analysts say changing ratio would support growth (Adds details, context)

BEIJING, May 16 (Reuters) - China’s bank regulators are examining the causes of volatility in the pace of new lending, but have no plans to make changes to the loan-to-deposit ratio that banks must abide by, the vice chairman of the industry watchdog said on Wednesday.

New lending is directed at Beijing’s behest, making it a key component of monetary policy operations in China and a crucial barometer of economic activity.

Fresh loans hit a 21-month low in September 2011, only to scale a 14-month peak in March 2012, leaving analysts struggling to calculate the likely trajectory of new loans over the year and the extent to which the underlying rate of economic growth was likely to be in need of additional policy support.

Economists say China should raise the loan-to-deposit ratio to enable banks to lend more and support growth, and avoid a crunch at the end of each quarter when banks suck in deposits to meet regulatory requirements for loans already extended.

“We have no plans to change the loan-to-deposit ratio for banks,” Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission, told reporters on the sidelines of a conference in Beijing.

“We have noticed that bank lending is sometimes volatile at the end of a quarter and the start of a quarter. We are now examining the regulatory system to make banks extend loans at a more steady pace,” Wang said.

China does not announce its annual lending target. Instead, banks are told individually how much to lend, and those that exceed their limits are punished either by having to put aside more cash as reserves or being forced to buy central bank bills.

The legal maximum value for the LDR is 75 percent, though China’s big four banks all have lower ratios, according to reports in Chinese state media.

Societe Generale’s China economist, Yao Wei, has advocated a softening of the loan to deposit ratio for months as the best way to support credit creation and growth.

The top four banks hold more than half of the total deposits in China’s banking system, so an adjustment of one percentage point could potentially have a big impact on overall lending.


Chinese banks extended 681.8 billion yuan ($107.98 billion) worth of new loans in April, missing analysts’ expectations of 800 billion yuan, after spiking to 1.01 trillion yuan in March

Sources have told Reuters that Beijing has lifted its lending target for 2012 to 8 trillion yuan, up from a 2011 target of 7-7.5 trillion yuan, while keeping the annual M2 growth target steady at 14 percent, and expects banks to lend 30 percent of the total in Q1, 30 percent in Q2 and the balance in 20 percent spurts in the third and fourth quarters of the year.

Still, state media reports suggest that banks still have some way to go before reaching their lending limit.

The 21st Century Business Herald cited an unnamed source in March saying that LDRs at China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) have risen to 70 percent and 63 percent respectively this year.

The report said Agricultural Bank of China’s (ABC) ratio was 57 percent and Bank of China’s (BOC) ratio was 72 percent. (Reporting by Aileen Wang and Nick Edwards; editing by Miral Fahmy and Ramya Venugopal)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below