The People’s Bank of China has greeted 2018 with further tightening of interbank lending activities.
Despite a crackdown on shadow banking last year, interbank certificate of deposit (CD) issuance reached a whopping 20.18 trillion yuan (approx. USD$3.1 trillion) in 2017.
Interbank borrowing is considered a key component of China’s shadow banking sector, with smaller lenders prevailing upon larger banks as a source of funds. Authorities have expressed strong concern about interbank borrowing, given that it can heighten risk and regulatory challenges by obscuring the final destination of funds.
Less than a week into the new year the Chinese central bank has already flagged a clamp down on interbank borrowing, with www.stcn.com reporting that PBOC has tightening the annual issuance amount filing requirements for interbank CD’s.
According to the new regulations for 2018 the interbank CD filing amount for all banks will be set at 1/3 of their total debt as of the end of September 2017, significantly reducing the the amount of funds they’re capable of accessing from the interbank market.
Interbank CD issuance plans for 2018 that have already been publicly released point to a dramatic decline in the planned issuance volumes compared to last year.
| Bank | 2018 planned issuance volume (billion yuan) | 2017 actual issuance volume | Percentage change |
| Bank of Chongqing | 82 | 133.06 (as of the end of November 2017) | -38.40% |
| Bank of Guangzhou | 60 | 95.82 (as of the end of September) | -37.40% |
| Zhongyuan Bank | 90 | 112.98 (as of 11 December) | -20.30% |
| Bank of Changan | 50 | 64.08 (as of the end of November) | -21.97% |
| Bank of Suzhou | 29.5 | 43.81 (as of the end of November) | -32.66% |
| Bank of Hubei | 50 | 75.67 (as of the end of November) | -33.92% |
| Bank of Jiujiang | 50 | 84.3 (as of the end of October) | -40.69% |
| Bank of Ningxia | 26 | 69.23 (as of the end of October) | -62.44% |
| Bank of Qingdao | 52.6 | 132.75 (as of the end of September) | -60.38% |
| Bank of Zhengzhou | 90 | 97.98 (as of the end of November) | -8.14% |
Members of China’s banking sector have said that the inclusion of interbank CD’s in macro-prudential assessments in tandem with tightening of the interbank CD filing amount will serve to severely constrain interbank lending activity in 2018.
In 2017 China’s commercial banks issued over 20 trillion yuan in interbank CD’s, for a year-on-year increase of over 50% and a record high issuance scale, while at present the value of outstanding interbank CD’s estimated to be in excess of 8 trillion yuan.
