China Taxation Service
Hotline: 86-755-82143348 Email: anitayao@citilinkia.com
ATAHK reads from Sina News that the new method for calculating the loan-to-deposit ratio can unfreeze up to 2 trillion yuan for banks to extend loans, the brokerage firm Shenyin & Wanguo Securities said in its research report. For details, please refer to the following news from Sina News on July 7th:
Starting in July, banks no longer need to count six types of funds as loans in the ratio, which is legally required to not exceed 75 percent. The regulator uses the ratio to pace money supply and ensure banks have enough cash in reserve.
The new calculating rules, announced by the regulator on June 30, also added two sources of funds to the deposit side, including large-sum certificates of deposit (CDs) to companies and individuals, which have not been issued yet.
Of all the changes, analysts say the one that excludes loans made using money raised from bonds that investors cannot redeem for at least one year would have the largest impact on banks because it covers a large amount of bonds.
The securities firm estimates that commercial banks hold about 360 billion yuan worth of financial bonds and 1 trillion yuan worth of subordinated bonds, which they use to replenish capital.
The changes could effectively cut the loan-to-deposit ratio by 2 percentage points, freeing up about 2 trillion yuan, the firm says.
How much of the capital will be lent out depends on banks’ conditions and their risk management policies, the firm says.
The changes reflect the regulator’s decision to encourage banks to rely less on deposits and more on financing from the capital market, an executive of a big bank said.
A source with the regulator said it has been studying the Net Stable Funding Ratio (NSFR), a liquidity indicator similar to the loan-to-deposit ratio.
The NSFR is being revised by the Basel Committee on Banking Supervision, an international banking supervisory body, to ensure banks have enough stable funding to cover their operations and off-balance-sheet exposure.
The NSFR and the loan-to-deposit ratio complement each other and the regulator wants to incorporate it into regulations followed by Chinese banks, the source said.
If you are interested in Chinese economy or trading and new policies between China and foreign countries, you can rely on ATAHK to do varieties kinds of trading and grab the new policies. You are welcome to contact ATAHK anytime, simply by calling us at 86-755-82143422 or visit www.3737580.net.