City and rural banks in Zhejiang latest to gain from cuts to required reserve ratio

Twenty-three city and rural banks in Zhejiang province have been allowed to cut their required reserve ratio by an extra 1 percentage point as easing measures gather pace in China, it was reported on Friday.

The move, reported by the National Business Daily, follows reports on Thursday that five city banks, including Bank of Beijing and Sheng Jing Bank, had enjoyed similar extra cuts, as Chinese authorities boost credit to stabilise economic growth.

Citing a document by the central bank’s Hangzhou branch, the newspaper said these small banks in the province enjoyed a total cut of 1.5 percentage points, including a reduction of 50 basis points for all lenders earlier this month.

The newspaper cited an estimate by Great Wall Securities that liquidity of up to 100 billion yuan (HK$125.9 billion) would be unleashed as a result of such cuts this month at regional banks that mainly focus on lending to small firms or businesses in rural areas.

However, a city commercial banker said limited capital adequacy is restricting it from extending loans further. “Under such circumstances, cuts in required reserve ratio are not urgently needed. What we need to do most is to complete a private placement in the first quarter or first half,” the newspaper quoted the unnamed banker as saying.