Date
14 December 2017
Shang Fulin, chairman of the China Banking Regulatory Commission, is reportedly planning to scrap loan ratio limits for banks. Photo: Bloomberg
Shang Fulin, chairman of the China Banking Regulatory Commission, is reportedly planning to scrap loan ratio limits for banks. Photo: Bloomberg

CITIC Bank, BoCom to gain most from scrapping of loan limits

China CITIC Bank Corp. Ltd. (00998.HK) and Bank of Communications Co. Ltd. (03328.HK) stand to benefit most from a reported plan by Chinese authorities to scrap loan-to-deposit ratio restrictions for lenders in mainland China, analysts said.

The China Banking Regulatory Commission (CBRC), under its chairman Shang Fulin, leads a task force that is reviewing the country’s Commercial Bank Law. The law, adopted 20 years ago, sets restrictions on the amount of loans that banks can extend based on their deposits.

In the review, the banking watchdog is expected to remove such restrictions, the Hong Kong Economic Journal said on Thursday, citing mainland media reports.

The loan-to-deposit ratio limit currently stands at 75 percent, which means banks can lend 75 yuan (US$12) for every 100 yuan deposit.

According the plan, the ratio will only serve as an indicator for supervision, but will no longer be used to set lending at a fixed level, the report said.

Last year, the CBRC allowed banks to remove six types of loans from the calculation and add two types of deposits to the ratio, thus increasing their capacity to lend and help bolster the slowing economy.

The regulators’ reported move is in line with the practice in developed markets where no such restrictions exist, Daiwa Capital Markets Hong Kong Ltd. analyst Leon Qi said.

It may not have much impact, however, since many large banks adopt a ratio that is way below the current limit, Qi said. 

Some banks with high loan-to-deposit ratios, such China CITIC Bank (73.08 percent) and Bank of Communications (73.79 percent), are likely to benefit more from the CBRC move, he said.

Translation by Vey Wong

[Chinese version中文版]

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