Q: What are the main considerations for launching Targeted Medium-term Lending Facility (TMLF)?
A: In order to further implement the decisions by the CPC Central Committee and the State Council to improve the financing environment for small and micro enterprises as well as private businesses, the PBC sets up a new lending facility TMLF so as to reinforce the financial support for the real economy, especially for the crucial areas such as small and micro enterprises and private businesses. Large-scaled banks play a vital role in bolstering the development of small and micro enterprises and private businesses. In this regard, TMLF is expected to provide stable long-term funding source for the large-scaled banks to improve their capabilities of providing credit to small and micro enterprises and private businesses, reduce financing costs, improve the liquidity structures of commercial banks and financial markets, and maintain reasonably adequate liquidity in the market.
Q: How is TMLF operated?
A: Large commercial banks, joint-stock commercial banks and large city commercial banks, which meet the macro-prudential requirements with relatively adequate capital and sound asset quality, and have the potential for providing more loans to small and micro enterprises and private businesses once granted more funds from the central bank, are eligible to apply to the PBC. Based on the applicants’ contribution to bolstering the development of real economy and their lending to small and micro enterprises and private businesses in particular, the PBC determines the volume of TMLF based on the demand of the applicants. The TMLF will mature in one year and can be rolled over twice in accordance with the demands of financial institutions, making the actual maturity as long as three years. The current interest rate of TMLF is 3.15%, 15 basis points lower than the rate of the Medium-term Lending Facility (MLF).
Q: What are the main considerations for raising the quotas of central bank lending and central bank discount by RMB 100 billion?
A: Apart from setting up TMLF to facilitate large-scaled banks’ credit support for small and micro enterprises and private businesses, the PBC also increases the quotas of the central bank lending and central bank discount by RMB 100 billion to support small and medium-sized financial institutions’ efforts in directing more loans to small and micro enterprises and private businesses. The PBC has raised the quotas of central bank lending and central bank discount twice in June and October 2018 respectively totaling RMB 300 billion, which has obtained satisfactory results and played a positive role in improving the financing environment for small and micro enterprises and private businesses. Based on the use of central bank lending and central bank discount quotas in the past, the PBC gives more support to the role of central bank lending and central bank financing in the targeted adjustments and precise provision of funds, and encourages small and medium-sized financial institutions that meet capital adequacy criterion, macro-prudential requirements and regulatory compliance standards to increase credit supply to small and micro enterprises as well as private businesses.
