July 25, 2018 / 4:05 PM / a year ago

UPDATE 1-China c.bank said to ease capital rule for some lenders to boost lending - Bloomberg

(Adds context)

July 25 (Reuters) - Some Chinese banks have received notice from China’s central bank that a capital requirement will be eased to support lending as authorities seek to mitigate increasing risks to the economy from the Sino-U.S. trade war, Bloomberg reported.

The People’s Bank of China (PBOC) told some financial institutions that the so-called “structural parameter” in its Macro-Prudential Assessment (MPA) of their balance sheets will be lowered by around 0.5 point, Bloomberg reported on Wednesday, citing people familiar with the matter.

MPAs are conducted by the PBOC quarterly to assess the level of risk in China’s financial system.

The reduction in the structural parameter will bring down the amount required for capital buffers, the Bloomberg report said.

It was unclear in the report which banks could be subject to the downward adjustment in the parameter, which is set at 1.0.

The PBOC said in its notice that the change is being made to support local financial institutions in meeting credit demand effectively, the report said.

Reuters could not contact the PBOC outside regular business hours.

Last week, China’s banking and insurance regulator said it had told commercial lenders to actively lower financing costs and improve funding services for small businesses and private firms.

The China Banking and Insurance Regulatory Commission (CBIRC) also said bigger banks should take the lead to boost lending to these smaller enterprises.

China’s economic growth has slackened this year as a multi-year deleveraging campaign by Beijing tapped the brakes on business activity.

The clampdown on risky lending practices and a debt build-up in the corporate sector has led to higher borrowing costs for businesses and reduced access to funds.

Small and medium-sized firms, which account for 80 percent of all jobs in China, are particularly exposed as they have smaller capital buffers against tighter credit conditions and are traditionally regarded by bigger banks as risky clients.

China’s economic outlook has also been clouded in recent months by heightened tensions with the United States over trade, which have roiled financial markets and led to additional tariffs on each other’s goods. (Reporting by Diptendu Lahiri in Bengaluru and Ryan Woo in BEIJING; Editing by Maju Samuel/Mark Heinrich)

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