THE central bank plans to ease some of its capital requirements for commercial banks, in line with previous moves to spur lending, two sources with knowledge of the matter said.

The People’s Bank of China has preliminarily decided to lower the “structural” and “pro-cyclical contribution” parameters in its Macro-Prudential Assessments (MPAs) for banks, with the extent of the adjustments determined by the province, the sources said.

MPAs are conducted by the central bank quarterly to assess the level of risk in China’s financial system. The tweaks in the MPA parameters mean banks will be able to lend more without compromising their performance in the central bank’s risk assessments.

The structural parameter is currently set at 1.0. The structural parameter will be lowered by 0.5 points, Bloomberg reported, quoting sources familiar with the matter.

The central bank has been taking steps to encourage commercial banks to boost lending to businesses, especially to small and medium-sized firms, as the world’s second-biggest economy slows. The measures this year have included three cuts in banks’ required reserve ratios.

“At present [the central bank’s local branches] have received second-quarter MPA materials from commercial banks in their respective jurisdiction, but MPA adjustments have not yet been officially implemented,” one of the sources said.

“The adjustments will be different in different provinces and different cities, and the ‘alpha’ [structural parameter] will not all be set at 0.5,” the source said.

(SD-Agencies)