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RRR adjustment not related to credit surge: China central bank

Xinhua, February 19, 2016 Adjust font size:

China's central bank on Friday clarified the motivation behind the latest reserve requirement ratio (RRR) adjustment, refuting claims that it was related to a January surge in credit.

In a statement on its website, the People's Bank of China explained that the decision to hike RRR on some banks was due to the fact that they no longer met the requirements for China's targeted RRR cut.

To enhance financial support to the real economy, the central bank in 2014 introduced a targeted RRR-cut mechanism for banks engaged in proportionate lending to agricultural and small firms, along with a string of requirements attached for banks to be eligible for the narrow-based cut.

After reviewing the policy in 2015, the central bank found some banks could not meet the requirements, meaning they were unqualified for the narrow-based cut.

A Bloomberg report interpreted the adjustment as a targeted RRR increase aimed at curing financial system risks following a surge of new yuan loans last month.

The report also linked the adjustment to the central bank's macro prudential assessment system, a new mechanism introduced in December to prevent financial risks.

"The RRR adjustment has nothing to do with the surge of new yuan loans or the central bank's macro prudential assessment system," the central bank clarified.

The central bank's macro prudential assessment will not simply dwell on the data of one month, but will take into considerations of multiple factors, it added.

The episode came as China's new yuan-denominated lending jumped to 2.51 trillion yuan (385 billion U.S. dollars) in January, up 71 percent from a year earlier and well above market forecasts.

January's new yuan loans were also about four times that posted in December 2015. Endi