Mainland China banking regulator to ease loan-to-deposit ratio

The mainland's banking regulator will relax how it calculates its loan-deposit ratio, tiptoeing around more arduous changes to the banking law while delivering a light boost to the economy.

Starting tomorrow, the China Banking Regulatory Commission will remove three types of loans from the regulation's scrutiny, including funds lent under the central bank's relending facility to support small enterprise and commercial bank loans from international financial institutions or foreign governments, the regulator said on its website.

The ratio limits outstanding loans to no more than 75 per cent of their deposits. A change in the regulation was expected, analysts said. In recent weeks, officials at CBRC have noted the positive impact a small adjustment to the law could have.

"This has been well accepted and well predicted by the market," said Lu Ting, the head of China research at Bank of America Merrill Lynch. "The impact will be quite small."

The move is not an official change to the law, which would require approval from as high as the Standing Committee of the National People's Congress.

"It's interesting because they are doing their best to make changes without actually changing the bank law," Lu said.