China to assure 100 pct LCR by 2018

China Banking Regulatory Commission (CBRC) announced Wednesday new measures on liquidity risk in commercial banks, targeting 100 percent Liquidity Coverage Ratio (LCR) by the end of 2018.

The CBRC urged commercial banks to identify, measure, monitor and control liquidity risk in all business, and to assure 60 percent LCR by the end of this year, as well as annual growth of ten percentage points before 2018.

LCR requires a bank to possess sufficient high-quality liquid assets to cover its liquidity demand over 30 days.

A severe cash crunch hit China last June, when the Shanghai Interbank Offered Rate (Shibor), a basic gauge of interbank borrowing costs, hit a record high of over 13 percent.

The central bank then started reverse repos in its regular open market operations to boost liquidity. On Tuesday, the central bank launched a 14-day repo at a bid rate of 3.8 percent, the first time in eight months.