The China Banking Regulatory Commission (CBRC) last week raised the loan-deposit target for Industrial and Commercial Bank of China (ICBC) (601398, 1398.HK) from 62 percent to 63 percent, while the target for China Construction Bank (CCB) (601939, 0939.HK) was increased from 68 percent to 70 percent, reports 21cbh.com, citing a person close to the regulator.
According to the source, the move was a routine adjustment and does not mean the CBRC is adjusting the maximum loan-deposit ratio requirement of 75 percent, and is unrelated to a loosening of monetary policies.
The CBRC established a monitoring system, CARPALS, at the beginning of 2010, to track on a daily basis several indicators of Chinese banks. The indicators included capital adequacy, loan quality, risk concentration, provision coverage, and liquidity, with the loan-deposit ratio being part of the liquidity indicator.
Based on the four largest commercial banks' total deposit balance of 38.25 trillion yuan at end January, a one percentage point increase in the loan-to-deposit target may lead to 380 billion yuan of new loans extended.
An insider at the credit department of a large commercial bank said the economic slowdown, and not the loan-deposit ratio target, was the cause of the weak new loan growth since the beginning of 2012.
During first 11 days of March, the big four banks granted less than 20 billion yuan of new loans, and except for ICBC, the other lenders reported negative new loan growth.