Caixin
Feb 09, 2017 06:45 PM
ECONOMY

PBOC Asks Banks to Curb New Loans

(Beijing) — China’s central bank is continuing to issue informal notices to commercial lenders to control the size of credit loans, several bankers said, as Beijing continues its efforts to cool a lending frenzy and reduce financial leverage.

Since the weeklong Lunar New Year holiday that ended Feb. 2, a local commercial lender has been slowing the pace it grants loans, urging branches to halt lending, sources from the bank told Caixin. The move reflects bankers’ claims that the latest informal directives to curb new loans do not solely target big state-owned lenders.

Chinese banks are expected to dole out roughly 2.2 trillion yuan ($320 billion) in new loans in January, lower than the record 2.51 trillion yuan in the same period last year, according to analysts from China International Capital Corp., one of China’s top investment banks. But several banking industry analysts believe that new loans in the first month of 2017 may set a record.

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At the start of each year, Chinese banks are inclined to pre-empt requests for loans in a bid to secure business as early as possible. This was apparent last year when commercial lenders granted 2.51 trillion yuan in new loans. This was the highest monthly level ever, although it was spurred in part by an expectation of falling interest rates. At that time, the central bank also stepped in to curb bank loans.

“The central bank is steadfast in its determination to cut financial leverage, and as a result, house sales may decline and growth in demand for credit loans would drop,” said analysts from Sinolink Securities in a research note.

But the squeeze on bank loans may have come about as a result of the Macro Prudential Assessment system, a framework adopted by the central bank at the beginning of 2016 to gauge risks in bank-credit exposure.

A banker told Caixin that it was normal for banks to adjust the size of loans as the central bank strictly measures lenders’ capital adequacy and loan-to-deposit ratios, and punitive lower interest rates on reserves will be imposed if banks fail to meet the requirements.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)

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