China Banking Regulator: Banks Have Enough Capital To Lend - Bloomberg

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Chinese banks have more than enough capital and they should extend their credit support to households and smaller companies, though there are risks of asset bubble formation, chairman of the China Banking Regulatory Commission Liu Mingkang wrote in an opinion piece in Bloomberg News.

"Despite the worry that the aggressive lending may strain the banks' capital, both individual banks and the industry as a whole are now more than adequately capitalized," the regulator said. "One thing we have learned from the past is that we need to build strong buffers into the banking system that cover capital, liquidity and provisioning."

Liu also told banks to support rural development, health care, energy saving and pollution reduction and cautioned that structural bubbles threaten to emerge in the Chinese economy. Last week, the People's Bank of China Governor Zhou Xiaochuan said in his New Year message that the central bank will encourage lending to new industries and agriculture sector.

A record CNY 9.21 trillion of new loans in the first 11 months of 2009 threatened asset bubble formation. But, the government said it is committed to contain any extraordinary movements in the property market. "Strong buffers," including capital, liquidity and provisioning requirements, have limited risks to the banking system from the lending surge, Liu said.

Moreover, Liu wrote although consumer spending has picked up some of the economic slack, China's under-developed social welfare system continues to restrain domestic demand from becoming a major part of China's growth story.

Chinese banks have more than enough capital and they should extend their credit support to households and smaller companies, though there are risks of asset bubble formation, chairman of the China Banking Regulatory Commission Liu Mingkang wrote in an opinion piece in Bloomberg News. (Market News Provided by RTTNews)