Financial advices for dummies

China to count off balance sheet financing in assessing banks risk sour


´╗┐BEIJING Oct 26 China's central bank will take into account off-balance sheet financing at commercial banks to assess their overall financial health, three sources with direct knowledge of the matter said late on Tuesday. The People's Bank of China will make the change to its so-called Macro Prudential Assessment (MPA) risk-tool to broaden its regulatory oversight to include wealth management products often sold by banks and not counted on their balance sheets, the sources told Reuters. The MPA assessment framework already included checks of loans, bond investments, equity investments and buybacks of financial assets sold, and deposits at non-financial institutions. The move marks another step in the PBOC's efforts to control rising leverage in the nation's financial system and underscored worries among analysts that unsustainable credit could hit an already slowing economy hard. The sources said the latest adjustment to the MPA system, first introduced to examine banks' capital adequacy ratios, will create additional restrictions to curb rising debt levels in the country's financial system.

Zhou Hao, senior emerging market economist at Commerzbank AG in Singapore, wrote in a note that the new rules would require banks to reserve more capital."This is part of the 'risk control' policy package as the shadow banking activities have picked up strongly due to monetary easing," Zhou wrote, adding that Chinese authorities have also become wary of a property bubble.

Reuters wasn't immediately able to obtain a response from the central bank. In recent weeks, the PBOC has also reintroduced the use of longer tenor, more expensive reverse repo operations in the money market in what traders and analysts have said is an effort to reduce dependence on cheap overnight borrowing and curb leverage in the bond market.

Money raised through the sale of off-balance sheet wealth management products is known to be a key source of funds for the bond market. One source said the latest change to the risk-measuring tool hasn't as yet come into effect as the central bank was still gauging the amount of money that would be affected. The news appeared to push bond yields up. China's benchmark 10-year government bonds yields opened up by 3bps on Wednesday morning and was trading at 2.732 percent as of 0316 GMT, compared with previous close of 2.717 percent. The central bank introduced the macro-prudential regime at the beginning of this year. The new assessment system has also been used to monitor banks' pricing of interest rates to prevent them from engaging in "vicious competition".

Ebrd loans bosnia $874 mln for strategic highway


´╗┐SARAJEVO Dec 22 The European Bank for Reconstruction and Development (EBRD) on Tuesday signed an 80 million euros ($87.44 million) loan deal with Bosnia to help the Balkan country build two sections of a strategic north-south highway. The sections, between the southern villages of Pocitelj and Buna, as well as a bypass around the central town of Zenica, will be part of the pan-European VC corridor, linking Budapest in the north with the Croatian port of Ploce in the south. The 15-year loan, which includes four-year grace period, will go to the Motorways Company of Bosnia's autonomous Bosniak-Croat Federation, Bosnia's Finance Minister Vjekoslav Bevanda said.

It will carry an interest of six-month Euribor plus 1 percent, Bevanda said, adding that Bosnia will set aside 16.2 million euros for the project. The construction of the two sections, stretching to a total length of some 11 kilometres, will be completed in 2019.

"The development of Corridor VC is a strategic priority... as the work supports national economic development and contributes to regional integration by improving connectivity between the capital Sarajevo, neighbouring countries and the EU," the EBRD said in a statement.

The EBRD has so far invested more than 1.7 billion euros in more than 122 projects in Bosnia. The Bank invests in infrastructure development, support for small and medium-sized firms and strengthening of the financial sector.