China: Banks start using new loan-to-deposit ratio

A CBRC official has said the regulator will consider adjusting the way the ratio is calculated to allow for more lending. That includes broadening the range of deposits to include “relatively stable” funds.

The new rules differ from the old ones in both loan and deposit calculations, the announcement shows.

Six types of loans can now be excluded from the formula. They include loans linked to the central bank’s re-lending program and proceeds from the sales of a special financial bond that raises money to support small and micro businesses. Loans made using money raised from bonds that investors cannot redeem for at least one year are also excluded under the new rules.

These loans all have clear and stable sources of funding and thus do not need to be matched with general deposits, the regulator said.

Two sources of funds have been added to the deposits side. One is the planned large-sum certificates of deposits (CDs) that can be issued to both companies and individuals. A foreign-invested bank can also count the amount of yuan deposits made by its foreign parent bank as long as the deposit’s maturity is longer than one year.

Moreover, the 75-percent cap on the ratio now applies to only yuan-denominated loans and deposits. Previously, foreign loans and deposits were also included.

Read the whole article here.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "China: Banks start using new loan-to-deposit ratio"

Leave a comment