China Tightens Credit, Increases Reserve Ratios as Loans Surge

The China Banking Regulatory Commission has tightened its grip on credit and has ordered banks to  temporarily halt new lending after mainland banks extended more than one trillion yuan (HK$1.14 trillion) in loans in the first 20 days of this month, an astonishingly high figure, reports the South China Morning Post.

 

Citing banking officials, the Post says that Industrial and Commercial Bank of China and Bank of China, among others, have temporarily stopped extending new credit lines under the directives of the regulator. Meanwhile, to maintain a strong cash position, some banks are doubling efforts to punctually retrieve overdue loans.

 

Bank officials denied reports that they were ordered to call back some new loans extended this month.

 

In a statement, ICBC said that it had made efforts to retrieve a large sum of overdue loans since January 20. "It's nothing unusual," the statement said. "The bank won't recklessly extend credits, nor will it stop lending once and for all."

 

Meanwhile, in another effort to curb the lending spree, several banks have been ordered to increase their reserve ratios.

 

The Post says that lenders that granted loans at a fiery pace this month were required to raise their reserve ratio by 0.5 percentage point to 16.5 per cent Tuesday. The order comes two weeks after the central bank announced a surprise 50 basis point increase in the ratio that applied to all mainland banks.
 

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