Foreign banks in China struggling to meet LDR

21 October 2011

Foreign banks in China are struggling to meet a new regulatory requirement concerning deposits.

While many of the large financial institutions operating in the country are prepared for the rule, smaller banks are struggling with the loan-to-deposit ratio (LDR), Reuters reports.

By the end of 2011, all institutions need to have an LDR of 75 per cent or less, under plans implemented by the Chinese Banking Regulatory Commission in 2006.

Mike Werner, China banking analyst at Sanford Bernstein, noted that the problem facing foreign companies is in sourcing retail deposits.

According a report by PricewaterhouseCoopers, LDR of those financial institutions originating overseas at the beginning of 2010 was 102 per cent, which gives an indication of the scale of the problem.

However, HSBC and Citigroup have already met the requirement.

It comes after China reduced its holdings of US debt as a result of the latter's downgrading by Standard & Poor's.

By Tony Aynsley

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development