FIVE Chinese banks are set to issue interbank certificates of deposit to foreign financial institutions inside the Shanghai free trade zone, the latest step of the city’s financial reforms, four sources with direct knowledge of the matter said.

    Three of China’s four major State-owned lenders — Industrial and Commercial Bank of China (ICBC), China Construction Bank and Bank of China (BOC), as well as Shanghai Pudong Development Bank and Shanghai Huarui Bank will soon kick off the pilot program, sources said.

    BOC’s local branch will issue certificates of deposit worth 500 million yuan (US$80.60 million) to 1 billion yuan, said a source.

    The amount, though small, gives banks’ a new channel to complement liquidity and marks the latest of a series of steps Shanghai is taking to foster financial reforms.

    “Banks themselves will decide the scale of issuance according to their liquidity,” said the source. “Such issuance in the free trade zone has relatively lower costs and can complement liquidity and help banks’ loan to deposit ratio.”

    Officials at the five banks declined to immediately comment. (SD-Agencies)