Archive for ‘bank governor’

10/03/2019

China central bank pledges more policy support as bank lending slides

BEIJING (Reuters) – China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in February’s bank lending due to seasonal factors.

The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation.

The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown.

“The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector,” Yi said at a press conference on the sidelines of the country’s annual meeting of parliament.

There is still some room for the PBOC to cut reserve requirement ratios (RRRs), although the amount of room is less compared with a few years ago, Yi said.

Chinese banks made 885.8 billion yuan ($131.81 billion) in net new yuan loans in February, down sharply from a record 3.23 trillion yuan in January, when several other key credit gauges also picked up modestly in response to the central bank’s policy easing.

Yi said combined January-February new loans and total social financing (TSF), a broad measure of credit and liquidity in the economy, could paint a more accurate picture as they showed a rise of 374.8 billion yuan and 1.05 trillion yuan from a year earlier, respectively.

DEBT DEFAULTS

Analysts say China needs to revive weak credit growth to help head off a sharper economic slowdown this year, but investors are worried about a further jump in corporate debt and the risk to banks as they relax their lending standards.

Corporate bond defaults hit a record last year, while banks’ non-performing loan ratio notched a 10-year high.

Pan Gongsheng, a vice governor at the PBOC, told the same briefing that China will control the amount of bond defaults in 2019, using both legal and market means.

Pan conceded that bond defaults increased last year, but the level of defaults was not high compared with China’s average bad loan ratio.

Premier Li Keqiang told parliament on Tuesday that monetary policy would be “neither too tight nor too loose”. Li also pledged to push for market-based reforms to lower real interest rates.

Chinese policymakers have repeatedly vowed not to open the credit floodgates in an economy already saddled with piles of debt – a legacy of massive stimulus during the global financial crisis in 2008-09 and subsequent downturns.

Sources have told Reuters the central bank is not ready to cut benchmark interest rates just yet, but is likely to cut market-based rates.

Yi said the downward trend in TSF has been initially curbed and broad M2 money supply growth will be more or less in line with nominal gross domestic product growth in 2019, Yi added.

Central bank data showed growth of outstanding TSF, a rough gauge of broad credit conditions, slowed to 10.1 percent in February from January’s 10.4 percent, versus a record low of 9.8 percent in December.

M2 money supply grew 8.0 percent in February from a year earlier, missing forecasts, the central bank data showed. Yi said China’s macro leverage ratio, or the amount of debt relative to GDP, was at 249.4 percent at the end of 2018, a fall of 1.5 percentage points from a year earlier, Yi said.
Analysts note there is a time lag before a jump in lending will translate into growth, suggesting business conditions may get worse before they get better.
Most economists expect a rocky first half before conditions begin to stabilize around mid-year as support measures begin to have a greater impact.
China’s economic growth is expected to cool to around 6.2 percent this year, a 29-year low, according to Reuters polls.
Growth slowed to 6.6 percent last year, with domestic demand curbed by higher borrowing rates and tighter credit conditions and exporters hit by the escalating trade war with the United States.
Source: Reuters
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10/12/2018

Urjit Patel: India’s central bank governor resigns

The Reserve Bank of India (RBI) Governor Urjit Patel arrives to attend a news conference after a monetary policy review in Mumbai, India, October 5, 2018. REUTERSImage copyrightREUTERS
Image captionRumours that Mr Patel was going to quit have been swirling around for weeks

India’s central bank governor Urjit Patel has resigned from his post citing “personal reasons”.

His resignation comes amid reports of a rift between the Reserve Bank of India (RBI) and Prime Minister Narendra Modi’s government,

This marks a rare case of a serving governor leaving his job midway through his five-year term.

Correspondents say the move is likely to undermine confidence in the economy and cause the rupee to fall.

In a statement, Mr Patel thanked his staff and officers, calling them the reason for the “bank’s considerable accomplishments in recent years”.

But speculation has been mounting for weeks that Mr Patel could resign over government pressure on the bank.

In late October, the RBI’s Deputy Governor Viral Acharya fired what appeared to be a broadside against attempts to undermine the bank’s independence.

“Governments that do not respect central bank independence will sooner or later incur the wrath of the financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution,” he said.

The government reportedly wants the RBI to allow ailing state-owned banks, groaning under bad loans to industries, to resume lending to small businesses. It also wants the regulator to lower interest rates to inject much-needed liquidity into the economy.

Reports say the government also wants to access the RBI’s surplus reserves.

Fears for economy

Prime Minister Modi and Finance Minister Arun Jaitley have issued statements voicing appreciation for Mr Patel’s work.

Mr Modi tweeted that Mr Patel left behind a “great legacy” while Mr Jaitley described a “deep sense of appreciation” for him.

However, others have responded with concern.

A former governor of the RBI, Raghuram Rajan, said that Mr Patel’s resignation should be seen as a statement of protest. Former Finance Minister Yashwant Sinha said “the resignation is a clear sign of the government trying to interfere with the working of the RBI”.

“Although India’s $2.6tn (€2.3tn; £2tn) economy has recently been boosted by a strong performance in consumer spending and manufacturing, the rupee has fallen by about 15% against the surging dollar so far this year, private investment remains slack and there are doubts on whether the economy will accelerate further,” says the BBC’s Soutik Biswas.

“The trade deficit, inflation, and high oil and commodity prices are a major concern,” our correspondent adds.

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