Mid-sized mainland banks have urged the industry's regulator to ease loan-to-deposit ratios as they struggle to attract deposits and expand lending amid the broader economic slowdown.
The banking regulator has set the loan-to-deposit ratio (LDR) for all commercial lenders at 75 per cent, which means they can lend no more than 75 yuan (HK$92) to clients for every 100 yuan they take in. The remaining 25 yuan goes mostly to cover cash flow, bad-loan probation and reserves at the central bank.
At the mainland's annual political summit in Beijing last week, top bosses at mid-sized banks including China Merchants Bank (CMB), China Minsheng Bank and China Everbright Bank complained about tightening liquidity in the banking system. CMB president Ma Weihua asked the regulator to ease the LDR as way to help lenders.
Ma, a former central banker who now heads the nation's sixth-largest lender by assets, told the South China Morning Post that he proposed to the regulator that loans to small and medium-sized enterprises (SMEs) should be excluded from ratio calculations, allowing banks more flexibility to expand lending.
Other mainland bankers also advised the regulator to make it easier for banks to expand their wealth-management services to attract more deposits, according to people familiar with the matter.
'There's almost a deposit crisis in the banking industry,' said a senior executive at a commercial bank in Shanghai. 'You get fewer deposits, but you still need to fight to keep your loan business growing.'
Last year, some small-city commercial banks received warnings from the banking regulator after their LDR was discovered to have exceeded 80 per cent. Beijing considers the ratio a key indicator of financial risk.
