24 Jun 2013
Flash: PBoC asked banks to handle liquidity issues internally - Nomura
FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the People‟s Bank of China (PBoC) issued a guidance note to commercial banks on 17 June, which asked banks to strengthen their liquidity management processes.
He begins by noting that the PBoC put the guidance note on its website this morning. He believes this is another sign that the PBoC is not willing to loosen policies or inject liquidity to bring down interest rates. He adds that the guidance note stated that “overall bank liquidity conditions are at a reasonable level” and asked banks to “prudently manage liquidity risks that have resulted from rapid credit expansion”, “appropriately contain the pace of loans and bill financing” and “utilize the stock of money and credit to support the economy”. Zhang adds, “We believe these statements suggest that the central bank's policy stance remains tight. The decision to put this note on its website suggests the PBoC wants to reiterate its policy stance. We maintain our view of a 30% probability that China's GDP growth drops below 7% in H2.”
He begins by noting that the PBoC put the guidance note on its website this morning. He believes this is another sign that the PBoC is not willing to loosen policies or inject liquidity to bring down interest rates. He adds that the guidance note stated that “overall bank liquidity conditions are at a reasonable level” and asked banks to “prudently manage liquidity risks that have resulted from rapid credit expansion”, “appropriately contain the pace of loans and bill financing” and “utilize the stock of money and credit to support the economy”. Zhang adds, “We believe these statements suggest that the central bank's policy stance remains tight. The decision to put this note on its website suggests the PBoC wants to reiterate its policy stance. We maintain our view of a 30% probability that China's GDP growth drops below 7% in H2.”