THE central bank would examine lending and capital levels at domestic banks each month to determine reserve requirements for individual lenders, China Securities Journal reported.
Banks could face higher requirements if their capital adequacy ratios fall below mandated levels, the newspaper said yesterday, quoting an unidentified person close to the People s Bank of China. A Beijing-based spokeswoman for the central bank declined to comment on the report.
China is grappling with the fastest inflation in more than two years and excess liquidity after record credit growth fueled the nation s rebound from the global financial crisis. Lending is likely to have topped the government s 2010 target maximum of 7.5 trillion yuan (US$1.1 trillion) after banks extended 99 percent of that amount in the 11 months to November last year.
This will enable the central bank to target abnormal lending and absorb liquidity more effectively, said Deng Ting, a Beijing-based analyst at Guodu Securities Co. The PBOC found itself incapable of doing much after new loans exceeded last year s quota. They hope to change that.
Any capital adequacy shortfall would be multiplied by a so-called stability factor to calculate differentiated reserve requirements, the report said. Affected banks would be required to adjust lending immediately, the Journal reported.
The People s Bank of China would grant a nine-month grace period before fully implementing the rules, it said.
The central bank could keep tightening under its new prudent monetary policy after raising reserve ratios six times in 2010 and benchmark interest rates twice.
China s biggest banks, including Industrial & Commercial Bank of China, the world s largest lender by market value, currently face an 18.5 percent reserve ratio excluding any additional requirements for individual lenders not publicly announced. For smaller lenders, the level is 16.5 percent.
The China Banking Regulatory Commission required big banks to have a minimum capital adequacy ratio of 11.5 percent and planned to moderately raise that level to counter cyclical risks, chairman Liu Mingkang said last month in an interview with Caixin magazine.
The central bank was also considering reducing the amount of interest paid on banks excess reserves to cut costs, China Securities Journal reported yesterday. China currently pays 1.62 percent annually on statutory reserves and 0.72 percent on the extra money.
China s efforts to counter price pressures include administrative measures, such as sales of State food reserves, as well as a shift from last year s moderately loose monetary policy.
The National Development and Reform Commission said Tuesday that new rules to counter price-fixing would take effect Feb. 1. They aim to prevent pricing monopolies that could affect consumers rights and economic development, the nation s top economic planning agency said on its Web site.
Besides raising rates and reserve ratios and selling bills to soak up cash, the central bank could also allow gains by the yuan, countering inflation by effectively making imports cheaper.(SD-Agencies)
