China has tightened rules on bank liquidity management amid worries over risks stemming from shadow banking activities, the China Securities Journal reported Thursday, citing the China Banking Regulatory Commission (CBRC). Under new rules which will take effect from March 1, commercial banks are required to raise their liquidity coverage ratio (LCR) to 100 percent by 2018. The LCR will help gauge the level of banks’ liquid assets to meet short-term obligations. Lenders will be given grace period to meet the LCR requirement, but a 60 percent level should be achieved by the end of 2014, according to the report. The new liquidity rules will help reduce banks’ excessive reliance on interbank funding. The CRBC has maintained that commercial banks’ loan-to-deposit ratio cannot be higher than 75 percent.
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