China may relax the banks’ loan-to-deposit ratio requirement5 July, 2012, 12:36. Posted by Zarathustra
We noted that liquidity in the Chinese banking system appears to be tight these days, and as a result, the People’s Bank of China has done multiple rounds of reverse repo to inject liquidity.
On a separate issue, Chinese banks are also required to keep there loan to deposit ratio at or below 75%. This, as the regulatory authority in China would like to believe, may be the cause behind weak loan growth data. Indeed, some Chinese banks has already come close or even exceeded the 75% loan to deposit ratio ceiling.
Economic Information cites sources from the China Banking Regulatory Commission (CBRC) that it is currently leaning towards relaxing the loan-to-deposit ratio ceiling within the new liquidity risk management guidance, although a report from Bloomberg suggests that the new liquidity management rules could turn out to be more strict than the existing ones even though the loan-to-deposit cap could be scrapped.