China plans to temporarily waive a requirement for banks to set aside reserves for some deposits, people with knowledge of the matter said, highlighting efforts to boost lending amid a slowdown of the world’s second-largest economy.
Commercial lenders will not be required to set aside reserves for the savings that they hold for non-deposit-taking financial institutions, the people said.
The waiver is part of planned changes to how banks’ loan-to-deposit ratios are calculated, said the people, who asked not to be identified because they were not authorized to discuss the plan publicly.
The waiver is seen as another move to replace a universal reserve requirement ratio cut that the People’s Bank of China (PBOC) needs to boost credit and bolster the economy.
Concerned that a broad reduction might send out a strong easing signal and bring turmoil to the stock market, China’s central bank has added liquidity by stealth at least four times in the past four months.
Chinese stocks rose the most in three weeks on Thursday. Industrial & Commercial Bank of China Ltd (中國工商銀行) and China Construction Bank Corp (中國建設銀行), the largest lenders, advanced at least 3 percent after China Business News and Market News International reported the waiver earlier.
This waiver follows a planned loan-to-deposit rule change reported last month that would let banks classify savings they hold for non-deposit-taking financial institutions as deposits, a government official briefed on the matter said last month.
Chinese banks are allowed to lend a maximum of 75 percent of deposits and are required to set aside 20 percent as reserves.
The change may add 7 trillion yuan (US$1.1 trillion) of money to be classified as deposits, according to a report last month by Huang Jie (黃潔), a Beijing-based analyst at China International Capital Corp (中金公司).
Huang also wrote, before reports about the waiver, that the PBOC might cut reserve requirement ratios twice as a result of the change in calculating loan-to-deposit ratios.
The central bank may cut banks’ required reserve ratio by a total of 1 percentage point in the first half, according to economists surveyed by Bloomberg from Dec. 18 to Tuesday.
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