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By Winni Zhou and Andrew Galbraith
SHANGHAI (Reuters) – The Chinese Central Bank announced on Thursday that it was ready to provide regular cash flow to the financial system after the takeover of a troubled lender, thus allowing more banks to get their money back. access funds.
The People's Bank of China (PBOC) loaned 500 billion yuan (57 billion pounds sterling) to financial institutions through its medium-term loan facility (MLF), offsetting 463 billion yuan from MLF loans maturing on the same day.
He left the interest rate for the first year MLF unchanged at 3.30 percent.
"The central bank has renewed the same amount of 463 billion yuan maturing MLF the day, and extended further to small and medium-sized banks, bringing the total amount of MLF operations to 500 billion yuan PBOC declared a statement on his site.
Money market traders said the central bank has been steadily expanding the list of qualified receivers for the liquidity management tool, allowing smaller lenders to tap into longer-term funds directly.
"Although the intention is still to promote loans to small and medium-sized enterprises, the priority now is to support small and medium-sized banks before they meet the macro-prudential and lending criteria," he said. said Frances Cheung, head of macroeconomic strategy for Asia at Westpac in Singapore.
"The market is optimistic that PBOC will be favorable, and the PBOC will not disappoint in the current context of risk reduction, "she said.
Thursday's cash injection came after regulators took control of Inner Mongolia-based Baoshang Bank on May 24 due to severe credit risks. This decision resulted in higher interbank financing costs and raised concerns for the economy as a whole.
To help stabilize sentiments, last week the central bank made its biggest cash injection in more than four months. Sunday, in a new message of comfort from investors, the PBOC In a statement, he said he was not considering new bank takeovers and would use various monetary policy tools to stabilize money markets and increase the liquidity of the banking system.
Market watchers expect economic tensions resulting from a prolonged trade war with the United States and a significant lack of liquidity due to loans maturing in the coming months require additional funds long PBOC, although greater liquidity makes the already weakened yuan vulnerable to further losses.
200 billion yuan more MLF loans will expire on June 19 and more than 1.6 trillion yuan of negotiable certificates of deposit (MNT), an interbank debt instrument, expires this month, according to Refinitiv data.
On Thursday, the central bank also injected 10 billion yuan under repo transactions, compared with 30 billion yuan of such loans expiring on the same day.
(Report by Winni Zhou and Andrew Galbraith, edited by Shri Navaratnam)
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