Interbank CD’s Included in Macro-prudential Assessments of Smaller Banks from 2019

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The Chinese central bank has announced that interbank certificates of deposits issued by smaller financial institutions will soon be included within the purview of macro-prudential assessments.

The 2018 Q1 China Monetary Policy Execution Report (2018年第一季度中国货币政策执行报告) issued by the People’s Bank of China (PBOC) on 11 May said that the Chinese central bank plans to include the interbank certificates of deposit issued by financial institutions with total assets of under 500 billion yuan in macro-prudential assessments starting from the first quarter of 2019.

The announcement follows PBOC’s decision to include the interbank CD’s of financial institutions with assets of over 500 billion yuan in the interbank debt indices of MPA assessments starting from the first quarter of 2018.

Interbank CD’s have seen flourishing growth in recent years, emerging as a primary source of funds for a sub-segment of Chinese banks, and drawing the attention of financial regulators concerned about associated risk.

According to the Q1 Monetary Policy Execution Report, in the first quarter China’s interbank market saw 6055 interbank CD issues for a total issuance volume of 5.24 trillion yuan, as well as total transactions on secondary markets of 32.5 trillion yuan.

PBOC said in the report that it would “innovate mentalities and methods for financial control, maintain the continuity and stability of policy, implement stable and neutral monetary policy, focus upon guidance of expectations, maintain rational and stable liquidity, and operate a neutral and moderate monetary and financial environment for supply side structural reforms and high-quality growth.”

 

 

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