Yang Kaisheng: Bank Liquidity Is No Big Problem

By staff reporter Zhu Hong

China's banks have adequate liquidity to avoid major problems, explained Yang Kaisheng, a CPPCC National Committee member and former president of Industrial and Commercial Bank of China.

"There were heated discussions not long ago about whether China's banking sector was facing a cash crunch," Yang said at a news conrference of the ongoing session of the 12th CPPCC on March 6. " We know that banking regulators measure liquidity with several pivotal indexes. One of them is the liquidity ratio, which is required to exceed a minimum of 25 percent. For Chinese banks this figure is closer to 44 percent, far above the statutory mark."

Yang also explained that the loan-to-deposit ratio for Chinese commercial banks, at 65.4 percent, is also well below the 75 percent upper limit, and their liquidity coverage ratio, a regulatory standard introduced by the Basel Committee on Banking Supervision, is comfortably above 100 percent. This standard requires banks to hold enough high-quality liquid assets to cover their net cash outflows over 30 days.

Mr. Yang said that Chinese banks are also on strong footing in terms of non-regulatory indexes. For instance, deposits account for as much as 79 percent of bank funds in China, with the figure hovering at 84-85 percent among the biggest banks. Meanwhile inter-bank borrowing takes up only 4.5 percent of their fund for China's commercial banks, compared with 15-20 percent or higher for banks overseas.