Caijing.com.cn

The banks which lent aggressively in the first half of 2009 have to buy non-tradable one-year bills.

By staff reporter Zhang Man

(Caijing.com.cn) The People's Bank of China began to place more than 100 billion yuan worth of one-year bills with selected banks on Sept. 14, in a bid to curb market liquidity, an official with the central bank told Caijing on Sept 15.

Bank of China (SSE: 601988; HKEX: 3988), Agricultural Bank of China and other joint-stock banks will be among the buyers, the unidentified official said.

This compulsory issue was never formally announced, but Caijing reported the arrangement on July 23.

BOC and ABC were the only two among the big four state-owned commercial lenders to be issued the bills, with 45 billion yuan to be purchased by BOC, the largest single amount.

"The placement targets banks that lent aggressively in the first half," a BOC official said.

These special one-year bills cannot be traded. "It means banks have to hold the special bills till maturity,doudoune moncler," said the PBOC official.

The yield has not been disclosed, but the after-tax yield of normal one-year bills is lower than the 1.5 percent yield of one-year treasury bonds. The placement will likely reduce these banks' liquidity and reduce their profits.


"The declines in BOC's lending in the past two months are partly related to the issue of the central bank bills,abercrombie france, and the placement will drain part of the bank's liquidity," said the BOC official.

BOC extended 901.9 billion yuan worth of yuan-denominated new loans in the first half,moncler, the largest among commercial lenders. ABC was next with 858.9 billion yuan.

BOC extended 80 billion yuan worth of new loans in July, down sharply from 177 billion yuan in June, the steepest decline among major banks. Its August new lending slid further to 72.2 billion yuan.

ABC,ralph lauren, the only lender of the big four to remain unlisted,abercrombie and fitch, said outstanding loans at end-July fell by 3 billion yuan from end-June, compared with 177 billion yuan in new loans in June. The bank issued 20.8 billion yuan in new loans in August.

Separately, on Sept. 15, the PBOC completed the issue of 85 billion yuan worth of normal one-year bills, with the yield flat for a sixth week at 1.7605 percent. It also entered into 50 billion yuan worth of 28-day repurchase agreements at 1.18 percent. With these operations, the central bank aims to stabilize money market interest rates and fine-tune credit growth,abercrombie, traders said.

According to Wind Information, which tracks China's capital market, 285 billion yuan worth of money market instruments will mature in the week ending Sept. 18, including 145 billion yuan in one-year central bank bills,abercrombie and fitch, 90 billion yuan in 91-day bills and 50 billion in one-year repos.

The PBOC is likely to inject liquidity on a net basis via open market operations in the week to maintain stability and moderately loose monetary policy, the traders said.
In the previous two weeks, the central bank injected a net 210 billion yuan and 225 billion yuan,mercurial, respectively, into the money market.

1 yuan = 14 U.S. cents

Full article in Chinese: http://www.caijing.com.cn/2009-09-15/110250403.html
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