SHANGHAI (Reuters) - China’s central bank plans to ease some of its capital requirements for commercial banks, in line with previous moves to spur lending, two people with knowledge of the matter said on Thursday.
The People’s Bank of China (PBOC) has preliminarily decided to lower the “structural” and “pro-cyclical contribution” parameters in its Macro-Prudential Assessments for banks, with the extent of the adjustments determined by the province, the sources told Reuters.
MPAs are conducted by the PBOC quarterly to assess the level of risk in China’s financial system. The tweaks in the MPA parameters mean banks will be able to lend more without compromising their performance in the PBOC’s risk assessments.
The structural parameter is currently set at 1.0. Bloomberg on Wednesday reported that the structural parameter will be lowered by 0.5 points, citing people familiar with the matter.
The PBOC has been taking steps to encourage commercial banks to boost lending to businesses, especially to small and medium-sized firms, as the world’s second-biggest economy slows. The measures this year have included three cuts in banks’ required reserve ratios.
“At present (the central bank’s local branches) have received second-quarter MPA materials from commercial banks in their respective jurisdiction, but MPA adjustments have not yet been officially implemented,” one of the sources said.
“The adjustments will be different in different provinces and different cities, and the ‘alpha’ (structural parameter) will not all be set at 0.5,” the source said.
The People’s Bank of China (PBOC) did not immediately comment.
Small and medium-sized firms, which account for 80 percent of all jobs in China, are particularly exposed as they have smaller capital buffers against tighter credit conditions and are traditionally regarded by bigger banks as risky clients.
Reporting by Shanghai Newsroom; Writing by Ryan Woo and Yawen Chen; Editing by Sam Holmes