Banking regulator raises lending quota

After record-setting lending growth in Chinese banks in the first quarter of 2009, China's banking regulator has begun a closer watch over the flow of new loans, with tightened supervision on corporate governance and risk control.

Speaking at a recent meeting held at the Chinese Academy of Social Sciences, China Banking Regulatory Commission (CBRC) chairman Liu Mingkang mentioned new regulatory requirements for capital adequacy ratio and provision coverage ratio at the main Chinese banks. The capital adequacy ratio must now be higher than 12%; provision coverage ratio needs to be improved to 150% by the end of the year, he said.

“The raise of the lending quota is one of the government's macro-economic policies, aiming to boost the economy and reduce reserve funds in companies,” said Xu Jianguo, senior partner of Boss & Young in Shanghai. “But it would never like to see the capital flows into the stock market or real estate,” he added.