Back
30 Dec 2014
PBoC to ease loan-to-deposit rules – Nomura
FXStreet (Barcelona) - The Nomura Team notes that the PBoC will ease loan-to-deposit rules from the beginning of 2015, further anticipating this move as supportive for further easing by the PBoC.
Key Quotes
“According to the Chinese-language newspaper Securities Times, the People‟s Bank of China (PBoC), on 27 December, issued a circular amending the rules for calculating the loan-to-deposit ratio(LDR).”
“Effective from the beginning of 2015, the new rules will count some interbank deposits (including deposits for securities clearing and settlement purposes and special purpose vehicle (SPV) deposits) as regular deposits for the purposes of calculating the LDR, according to the report.”
“The interbank deposits that are included in the LDR will also be subject to reserve requirement but the crucial point is that the reserve requirement ratio (RRR) will be set at zero temporarily. The move followed a State Council meeting on 19 November, which called for more flexibility in calculating LDR for banks. The new regulation, however, has yet to be confirmed by the PBoC.”
“Overall, the new method of calculating LDR supports our view that there will be more policy easing from the PBoC to avoid the economy weakening too sharply."
"We still expect one 50bp RRR reduction in each quarter of 2015 and one more interest rate cut in Q2.”
“Despite more policy easing, we expect growth to continue to slow owing to deep-seated domestic challenges such as the property market correction, tighter controls over local government debt and deleveraging.”
"We maintain our GDP growth forecast of 7.3% for Q4 2014 before slowing to 7.1% in Q1 2015.For the full year, we continue to forecast 7.4% GDP growth for 2014 and 6.8% for 2015.”
Key Quotes
“According to the Chinese-language newspaper Securities Times, the People‟s Bank of China (PBoC), on 27 December, issued a circular amending the rules for calculating the loan-to-deposit ratio(LDR).”
“Effective from the beginning of 2015, the new rules will count some interbank deposits (including deposits for securities clearing and settlement purposes and special purpose vehicle (SPV) deposits) as regular deposits for the purposes of calculating the LDR, according to the report.”
“The interbank deposits that are included in the LDR will also be subject to reserve requirement but the crucial point is that the reserve requirement ratio (RRR) will be set at zero temporarily. The move followed a State Council meeting on 19 November, which called for more flexibility in calculating LDR for banks. The new regulation, however, has yet to be confirmed by the PBoC.”
“Overall, the new method of calculating LDR supports our view that there will be more policy easing from the PBoC to avoid the economy weakening too sharply."
"We still expect one 50bp RRR reduction in each quarter of 2015 and one more interest rate cut in Q2.”
“Despite more policy easing, we expect growth to continue to slow owing to deep-seated domestic challenges such as the property market correction, tighter controls over local government debt and deleveraging.”
"We maintain our GDP growth forecast of 7.3% for Q4 2014 before slowing to 7.1% in Q1 2015.For the full year, we continue to forecast 7.4% GDP growth for 2014 and 6.8% for 2015.”