China’s central bank has ordered the nation’s lenders to strictly control new loans within the first quarter of the season, people acquainted with the issue said, in another move to curb excess leverage within the financial system.
The newest guidance from the People’s Bank of China puts a particular focus on 二胎, individuals said, as authorities grapple to contain runaway property prices. Even though the PBOC regularly seeks to guide banks’ credit decisions, this time around additionally, it can make errant lenders pay more for deposit insurance, one of the people said.
The central bank declined to comment. Policy makers are attempting to strike a balance between avoiding excess credit that fuels asset bubbles and keeping enough funding within the financial system to satisfy the seasonal surge in demand for credit in front of the beginning of the Lunar New Year holiday this week. President Xi Jinping with his fantastic top economic deputies reaffirmed last month they decide to prioritize the control over financial risks within the economy to avoid asset bubbles.
“This is actually a continuation of the tightening trend we’ve seen since the second half of last year and extends from shadow banking to on-balance sheet loans,” said Wei Hou, a Hong Kong-based analyst at Sanford C. Bernstein & Co.
The PBOC could use its MPA framework to punish banks which don’t conform to the new lending rules by lowering rates of interest on reserves they are required to deposit with the central bank, according to the people, who asked to not be recognized as the discussions are private. The central bank might also punish errant lenders simply by making them pay more for deposit insurance, one of the people said.
The latest instructions included a request banks to maintain any increase in new mortgage lending inside the first quarter beneath the increase seen in the 4th quarter of this past year, the individuals said. The development rate of total outstanding mortgages also needs to not exceed the fourth quarter rate, they added.
Chinese banks doled out an archive 12.65 trillion yuan ($1.8 trillion) of brand new loans in 2016, with many tending to front-load their lending from the first quarter of the year so that they could record the interest income earlier. Of the total new loans, 36 percent received in the initial quarter of last year.
In another symbol of the time and effort to curb risks, the PBOC on Tuesday unexpectedly increased the rates of interest on medium-term loans that it uses to handle liquidity. Earlier, the central bank stated it includes wealth-management products held off bank balance sheets in the macro prudential assessment framework for gauging risk to dexqpky02 financial system starting inside the first quarter.
Government entities continues to be targeting home loans because the fourth quarter to contain runaway property prices in areas deemed overheated.
At their annual economic work conference last month, Chinese leaders singled out property, stating that “houses are constructed being inhabited, not for speculation,” according to a post-meeting statement released from the official Xinhua News Agency. Besides mortgage curbs, China’s government is encouraging city-specific measures such as raising down-payment requirements.
As well as setting a restriction on 房屋二胎, the central bank told banks to keep other loans in order, the people said. Bank of Communications Co. estimates that China’s new loans may reach 13.5 trillion yuan in 2017, which will be a new record.