MNI: China Banks Turn to Loans As Interbank Transactions Fade

     BEIJING (MNI) - New loans by Chinese banks have seen a significant jump

this year as regulations over interbank transactions -- especially

off-balance-sheet activities -- have gradually tightened, Xiao Yuanqi, chief of

the China Banking Regulatory Commission's Prudential Regulation Bureau, told

journalists Friday during a press conference.

     During the first 10 months of 2017, new loans increased CNY1.5 trillion

year-on-year to CNY12.2 trillion, Xiao noted. New loans comprised 79.5% of total

new assets of banks, compared with 44.3% in the same period last year.

     "The rise in new loans indicates banks are more focused on their primary

business under the influence of stricter regulations," Xiao argued.

     Meanwhile, interbank assets and liabilities decreased CNY3.4 trillion and

CNY1.4 trillion, respectively, during the first 10 months of the year. Growth in

wealth management products slowed to 4.7% during the same period, a drop of 26.5

percentage points from the January-October period last year. 

     Interbank WMPs decreased a net CNY2.7 trillion and entrust loans dropped

CNY896.1 billion.

     Growth in special purpose vehicles decelerated by CNY5.1 trillion during

the January-October period, according to the CBRC.

     "The growth of off-balance-sheet transactions fell to 16.1% from the

previous annualized rate of 50%," Xiao said.

     The CBRC has asked banks to improve their ability to prevent and deal with

risks. As of the end of October, the provision coverage ratio of commercial

banks was 180%, and the capital adequacy ratio stood at a high level of 13.3%.

     Banks' liquidity ratio was 48%, much higher than the requirement of 25%,

Xiao stressed.

     The CBRC also stressed it is cracking down on illegal cash loan businesses

and is mulling putting out detailed guidelines on the matter as soon as

possible.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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