China may look at banks’ cross-border yuan business in risk assessments: Caixin

People walk past PBOC headquarters in Beijing

SHANGHAI (Reuters) – China’s central bank is considering including cross-border yuan business into its assessment of macro-prudential risks in the country’s financial system, online finance magazine Caixin reported on Saturday, citing unnamed regulatory sources.

Earlier this year, China introduced a risk measuring tool known as the Macro Prudential Assessment system (MPA) to take into account banks’ capital adequacy and leverage ratios, assets and liabilities, liquidity and foreign debt risks.

Caixin said the inclusion of banks’ cross-border yuan business risk into the MPA system could incorporate items such as the ratio of cross-border yuan outflows to the total amount of local and foreign currency outflows.

The magazine quoted an unnamed banker as saying the move would force banks to “do more incoming yuan business, and less yuan outflow activities … It means that no matter how large the demand is from clients, how much profit it can offer, the bank will have to weigh up the pros and cons.”

The People’s Bank of China was not immediately available to respond to a fax and calls from Reuters for comment outside working hours on the weekend.

The government has enacted a string of measures to stem surging currency outflows with the yuan <CNY=CFXS> plumbing 8-1/2 year lows against the surging U.S. dollar.

The Wall Street Journal on Friday reported that China plans to tighten controls on companies looking to invest abroad, in an effort to stop a surge of capital fleeing offshore.

While Beijing has been busily damming up official channels for money to leave China, more than ever is leaking out through shady means as investors flee the country’s slowing economy and weakening currency, financial industry executives say.

(Reporting by Brenda Goh and Winni Zhou; Editing by Himani Sarkar)