China Seeks to Slow Rapid Growth of Lending

Post by Shawn Chandok

Article by Keith Bradsher

Chinese banking regulators are putting pressure on the country’s banks to raise more capital and temper their rapid growth in lending, in a clear sign of official concern about the sustainability of the nation’s credit boom, senior Chinese bankers said on Monday.

United States and European officials have also pressed their banks to shore up their finances in recent months, but the reasons behind the Chinese regulators’ capital-raising push are very different. In some ways, the regulatory pressure reflects the robustness of the Chinese economy, in contrast with lingering economic weakness in the West.

Western regulators have put pressure on the banks they oversee to raise money, often through the sale of overseas units and other assets, to rebuild capital bases depleted by losses on mortgage-backed securities and other investments. Western banks have moved to raise the money even as they have slowed their issuance of new loans, which has helped hold up their capital as a percentage of assets.

Regulators in Beijing have a different concern, Chinese bankers said. As bank lending has soared this year, banks’ capital has risen less quickly, so their capital adequacy ratios have begun to slip.

While China’s regulators are comfortable with current capital adequacy levels at the nation’s major banks, they want them to have plenty of capital to be able to continue lending briskly next year without difficulty if needed to sustain economic growth, bankers said.

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