Small banks get the upper hand from new policy

08:15, September 27, 2010      

Email | Print | Subscribe | Comments | Forum 

By Wang Xinyuan

New rules allowing banks to sell assets to each other will help lenders free up cash by off-loading less lucrative loans.

Twenty-one banks agreed in Shanghai Saturday to sell loans on China's interbank market after the government recently approved such transactions for the first time.

"The move provides the banks with some flexibility under the tightening regulatory environment," said Zhang Youxian, an analyst at the Bank of China's Institute of International Finance.

Allowing banks to transfer loans will let large banks free up cash by selling existing loans and lend on new projects with higher returns. This move should especially benefit smaller banks by enabling them to buy loans that they wouldn't normally have access to, Zhang said.

The move comes amidst tightening regulations on the banking industry aimed at heading off the overheating real estate market and the rising number of non-performing loans.

The government capped new lending at 7.5 trillion yuan ($1.12 trillion) in 2010, down 22 percent from a record high of 9.6 trillion yuan ($1.43 trillion) last year.

Total new lending for the first eight months of this year reached 5.7 trillion yuan ($850.75 billion) nationwide.

In addition to the reduced amount of loans given out, banks are not allowed to use more than 75 percent of the deposits they take in for lending. Also, large State-owned banks are required to have at least 11.5 percent of their loans in capital, while for smaller banks that figure is 8 percent.

To lend more, many listed commercial banks supplement their capital by issuing shares on the stock market.

The Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Bank of Communications plans to finance 287 billion yuan ($42.84 billion) this year on the stock markets to support their lending efforts.

Source: Global Times


  • Do you have anything to say?


Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • Chinese Navy soldiers hold an evening party marking the upcoming 62nd National Day aboard Chinese Navy hospital ship "Peace Ark" in the Pacific on Sept. 28, 2011. The Chinese National Day falls on Oct. 1. (Xinhua/Zha Chunming)
  • Photo taken on Sept. 30, 2011 shows the crowd at the plaza of Beijing Railway Station in Beijing, capital of China. The railway transportation witnessed a travel peak with the approach of the seven-day National Day holidays on Friday. (Xinhua)
  • A man wearing high-heel shoes takes part in the 3rd annual Walk a Mile in Her Shoes, an event when men literally walk in women's shoes to raise awareness about ending violence against women, at Yonge-Dundas Square in Toronto, Canada, Sept. 29, 2011. (Xinhua/Zou Zheng)
  • Photo taken on Sept. 29, 2011 shows a cargo ship in danger on the sea near Zhuhai City, south China's Guangdong Province. Cargo ship Fangzhou 6 of Qingzhou of southwest China's Guangxi Zhuang Autonomous Region lost control after water stormed into its cabin due to Typhoon Nesat on the sea near Zhuhai Thursday, leaving 12 crew members in danger. Rescuers rushed to the ship and saved them by using a helicopter. (Xinhua)
  • Actress Gong Li poses for L'Officiel Magazine. (Xinhua Photo)
  • Demonstrators from the Occupy Wall Street campaign hold placards as they march in the financial district of New York September 29, 2011. After hundreds of protesters were denied access to some areas outside the New York Stock Exchange on September 17, demonstrators set up a rag-tag camp three blocks away. Zuccotti Park is a campground festooned with placards and anti-Wall Street slogans. The group is adding complaints of excessive police force against protesters and police treatment of ethnic minorities and Muslims to its grievances list, which includes bank bailouts, foreclosures and high unemployment. (Xinhua/Reuters Photo)
Hot Forum Discussion