The mainland's central bank may introduce a new policy requiring commercial banks to keep some foreign currency in their accounts to slow the rise in foreign-exchange lending. Exporters say the measure could help cool the mainland's apparently overheated economy by further tightening money supply. China Securities Journal yesterday quoted an inside source as saying that the central bank was likely to reinforce the measure by requiring all commercial banks to maintain a minimum amount of foreign currency. Those who fell short of the required level would have to buy from the central bank with their yuan-denominated reserves. The measure, according to Zhou Dunren at Fudan University in Shanghai, would slow foreign currency bank loans, an area that has seen relatively loose monitoring in the past. 'Banking regulators have put a bunch of measures in place preventing lenders from loaning too much Chinese currency but few of those rules deal directly with foreign currencies. Many banks have made use of the loophole to over-loan foreign currencies,' Professor Zhou said. Official statistics show that mainland commercial banks had US$159.3 billion in foreign currency deposits at the end of September, a 0.84 per cent drop from last year. Outstanding lending was US$205.7 billion, up 27.26 per cent. Last month alone, commercial banks recorded a US$3.4 billion drop in foreign currency deposits while their lending increased by US$8.6 billion. This new rule, if effective, should close both doors for major commercial lenders and make the central bank's attempts to soak up market liquidity more effective, Professor Zhou said. The central bank has raised the bank deposit reserve ratio seven times this year to cool the runaway economy. Mainland foreign exchange reserves stood at US$1.43 trillion at the end of September, up 45.1 per cent year on year.