The People's Bank of China and the State Administration of Foreign Exchange issued the "Regulations on Matters Relating to the Overseas Loan Business of Banking Financial Institutions (Draft for Comments)" (hereinafter referred to as the "Regulations"). The explicit restriction requires that the offshore loan balance of domestic banks shall not exceed the upper limit, i.e., the offshore loan balance ≤ the upper limit of the offshore loan balance.

According to the published list, the offshore loan business of a total of 27 banking institutions will be under the unified management of PBOC and the SAFE, including three policy banks, six large state-owned banks, 12 joint-stock banks, 3 city commercial banks and 3 foreign banks in China.

At the same time, the Regulations clarify the formula for calculating the two comparative indicators, which are: the upper limit of foreign loan balance = Tier 1 Capital net amount of domestic banks (domestic branches of foreign banks are counted by working capital) x foreign loan leverage ratio x macro-prudential adjustment parameters; foreign loan balance = foreign loan balance in domestic and foreign currency + foreign loan balance in foreign currency x exchange rate risk conversion factor.

The Regulations also state that PBOC and the SAFE will make dynamic adjustments to the leverage ratio, macro-prudential adjustment parameters and exchange rate risk conversion factors for offshore loans in accordance with the macroeconomic situation and cross-border capital flows. Among them, the leverage ratio of overseas loans of China Development Bank and the Export-Import Bank of China is 1.5, while that of the rest of banks is 0.5; the macro-prudential adjustment parameter and exchange rate risk conversion factor are 1 and 0.5 respectively.

According to this calculation, as of the end of June, the disclosed foreign loan balances of three banks, Bank of China, ICBC and Industrial Bank, have exceeded the upper limit of foreign loan balances, and the disclosed foreign loan balances of Bank of Communications, CITIC Bank, Huaxia Bank and Bank of Beijing are closer to the upper limit of foreign loan balances.

And for exceeding the upper limit of the indicator, the Regulations require that banking institutions should suspend new offshore loan business until the offshore loan balance is adjusted to within the upper limit. The central bank data presentation, as of the end of August, the balance of overseas loans (domestic and foreign currency credit) of depository financial institutions was 4.39 trillion yuan.