Russian central bank tells lenders to cut yuan loans
MOSCOW, Sept 6 (Reuters) -Russia's central bank urged commercial lenders to reduce their yuan loan portfolios amid a yuan liquidity shortage, with the rouble plummeting against China's currency to its lowest level since April.
The regulator said lenders have been increasing their yuan loan portfolios since the end of 2023 as they sought to replace loans in dollars and euros with loans in yuan, now the most traded foreign currency in Russia.
The acute yuan shortage follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Major Russian commercial banks said on Thursday they did not have enough liquidity to continue lending in yuan and called for central bank action.
Since Russian banks cannot easily raise yuan liquidity abroad because of Western sanctions, deposits by Russian exporting companies have become the main source of yuan liquidity. The regulator described them as "rather volatile."
It said the yuan liquidity shortage forced commercial lenders to use one-day swaps with the central bank to replenish their short-term yuan stocks, driving up the swap interest rate and exacerbating volatility in the market.
"To stabilize the situation in the forex market under current sanctions, it is advisable for the banking sector to reduce the currency exposure of assets, including limiting the growth of foreign currency lending," the regulator said.
It added that its one-day swaps were an instrument to manage short-term volatility in the forex market and should not be considered a source of longer-term funding for commercial loan portfolios.
On Aug. 30 banks raised a record 35.2 billion yuan from the central bank through its one-day swaps.
Reporting by Elena Fabrichnaya, writing by Gleb Bryanski; Editing by Hugh Lawson
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
