Official calls for action to halt interbank abuses

PUBLISHED : Thursday, 25 November, 1993, 12:00am
UPDATED : Thursday, 25 November, 1993, 12:00am

A CENTRAL bank official has called for a crackdown on abuses in interbank lending to effectively implement monetary control.

Xu Jian, an official with the Department of Financial System Reform of the People's Bank of China, said the interbank lending market should be standardised to limit lending periods to two months.

Some local banks did not follow such requirements, he said.

''With increasing saving deposits and limited scale of loan issues, some banks have overindulged in interbank lending,'' he said.

Mr Xu said because of the disparity in economic development, capital from the interior had flowed to the economically developed coastal areas with high rates of interest.

''So in this case, the interbank market has been changed into a monetary market,'' Xinhua (the New China News Agency) quoted Mr Xu as saying.

From January last year to May this year, 14.3 per cent of interbank lending was used as working capital, loans for fixed assets, real estate and direct investment.

''This is not normal practice of the interbank market,'' said Mr Xu.

The central bank should control direct and indirect interbank lending by means of monetary policy so as to form a rational system naturally, he said.

Mr Xu said China should standardise and specify the role of its financial market, making clear the definitions between interbank lending, monetary market and capital market.

There should be a nationwide electronic network for interbank lending to help form a unified interest rate system, he said.

On the reform of the foreign exchange system, Vice-Premier Zhu Rongji has given his personal blessing for the series of changes to be introduced next year.

The Hong Kong-based Ta Kung Pao newspaper quoted Mr Zhu as confirming that ''unification of exchange rates could be implemented next year''.

China had earlier said the target would be achieved within five years.