--Banking regulators eyeing change to boost loans to cash-strapped SMEs--

With China’s economy  moderating to the slowest pace in two and a half years, mainly due to the sovereign debt crisis in Europe and sliding home sales in China, China’s banking regulatory commission is under pressure to ease credit by increasing lending capacity. As a result, banking regulators are allowing the nation’s five biggest banks to increase first-quarter lending and also weighing a plan to relax capital requirements for lenders. The central bank will let the largest lenders increase new loans by a maximum of about 5% from a year earlier.

The China Banking Regulatory Commission is delaying implementing the most stringent capital adequacy ratios (the ratio is used to protect depositors and promote the stability and efficiency of financial systems) and may lower risk weightings for loans to small businessmen and companies.

The central bank in December cut the reserve requirement for banks for the first time since 2008. Relaxing the capital rules will allow banks to provide more loans without having to raise funds from equity or bond sales and give them more incentive to boost loans to cash-strapped smaller firms.