China’s Top Financial Authority Calls for Greater Reform and Capital Supplementation for Smaller Banks

China’s Financial Stability and Development Committee (FSDC) (国务院金融稳定发展委员会) has called for greater reform of China’s smaller lenders and expansion to their capital supplementation channels.

The 28th meeting of the FDSC convened on 4 May called for “seizing implementation of reform and capital supplementation plans for small and medium-sized banks,” with the goal of “servicing micro, small and medium-sized enterprises.”

FSDC also called for “resolving outstanding problems for small and medium-sized banks in areas including business positioning, corporate governance and lending costs.”

The 88th regular meeting of the State Council recently called for further strengthening financial inclusion for micro, small and medium-sized enterprises, with measures including further targeted reductions in the required reserve ratio (RRR) for small and medium-sized banks.

The Peo­ple’s Bank of China (PBOC) recently an­nounced via its of­fi­cial web­site that it would cut the RRR for smaller banks by 100 ba­sis points, via two cuts of equal size on 15 April and 15 May. 

The move will re­duce the RRR for Chi­na’s roughly 4000 small and medium-sized banks to 6%, un­leash­ing as much as 400 bil­lion yuan (ap­prox. USD$56.38 bil­lion) in liq­uid­ity. 

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