Loan to Deposit Ratio Gone

SCMP: China to scrap loan-to-deposit ratio requirement for commercial banks
Beijing plans to scrap the loan-to-deposit ratio for mainland China's commercial banks in yet another bold move to overhaul the sector and bolster lending as economic growth slows.

The State Council said on Wednesday that it had approved a draft amendment to the 20-year-old commercial banking law that would end a cap on banks lending a maximum of 75 per cent of their deposits.
This change will kick in once lending picks up. Until then, it will have limited to no effect on lending.

1 comment:

  1. I'm thinking that this change is not to increase lending, but to prevent technical breaks of regulations as deposits drop in China. Rather remove the rule now before the 75% bar is reached so that when it does happen, no one cares and no banks are forced to sell off their (stinky) assets.

    Also on the topic of deposits, isn't it the case that the banks have been losing deposits for awhile now? If so, where are they going? The usual explanation of "in the market" does not seem to make sense since brokerages should be running their deposits at a bank, unless China structures it's monetary system differently and the brokerages themselves directly bank with the central bank.

    - Luke