Caixin
Aug 21, 2018 07:30 PM
ECONOMY

China Wants Banks to Buy More Local Government Bonds: Report

Classifying local government bonds as 'risk-free' will make them more attractive to banks, as they will no longer affect the banks' capital adequacy ratio. Photo: VCG
Classifying local government bonds as 'risk-free' will make them more attractive to banks, as they will no longer affect the banks' capital adequacy ratio. Photo: VCG

China is planning to encourage banks to increase their holdings of local government bonds by giving the debt risk-free status, state media reported on Tuesday, a move that could boost demand for a flood of sales set to hit the market by the end of October.

The country’s banking regulator is expected to reduce the risk weighting of banks’ local government bond holdings to zero from the current 20%, the China Securities Journal reported, citing multiple unnamed sources with knowledge of the matter.

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