(Updates with details and context)
SHANGHAI, May 27 (Reuters) – Chinese regulators have allowed smaller banks to borrow more from overseas, three sources with direct knowledge of the matter said, a move that mainly benefits local branches of foreign banks who reported a shortage of foreign currency. Capital city.
The sources told Reuters that some of these lenders lobbied against changes to cross-border funding rules earlier this year, which significantly reduced their loan portfolios.
Some of the foreign banks in China had been forced by these regulations to drastically reduce foreign currency lending to Chinese customers, while some held such loans on their books at levels several times higher than required.
China’s central bank has now raised the cross-border leverage ratio of some commercial banks that have a capital base of less than 100 billion yuan ($15.7 billion) to 2 from 0.8, according to a document seen by Reuters.
The same document also shows that the central bank granted qualified commercial banks an initial funding quota of 10 billion yuan ($1.57 billion).
The adjustments, which took effect on May 25, follow a meeting between Yi Gang, the governor of the People’s Bank of China (PBOC), and a delegation of foreign banks discussing the development of foreign banks in China.
The sources said they mainly targeted Chinese branches of foreign banks.
Official central bank data showed China’s foreign currency loan balance stood at $923.2 billion at the end of April, up 10.8% from a year earlier, while foreign currency deposits hit an all-time high of $1 trillion.
China’s central bank has tightened the way it assesses cross-border financing risks to make it harder for domestic companies to raise funds in overseas markets. ($1 = 6.3757 Chinese yuan) (Reporting by Cheng Leng, Winni Zhou and Tony Munroe; Editing by John Stonestreet and Alexander Smith)