What Are Conforming Loan Limits?

The loan limit is the highest planned limit for a bank to issue loans in a socialist country with a planned economy. Limit management is an important part of the credit management of socialist countries. The loan limit issued after the unified balance of the national comprehensive credit plan is a directive and cannot be changed without the consent of a superior bank. According to different classification standards, there are different types. (1) According to the nature and purpose of the loan, it can be divided into turnover index and one-time index. Revolving indicators refer to indicators that control only the balance of loans and that they can continue to be turned over and issued after the loans are recovered. One-time indicators refer to indicators used to control the amount of loans issued. They are issued only once and cannot be used after being recovered. (2) Control time according to indicators can be divided into mid-term indicators and end-of-period indicators. The interim loan indicator is an indicator for temporary turnover during the implementation of the plan. It is valid during the interim period and will be void at the end of the period. The period-end indicator refers to the point-in-time indicator at the end of the planned period, which cannot be broken without approval. (3) According to its role in plan management, it can be further divided into turnover indicators for temporary loans; mobile indicators to be allocated, and backup indicators to cope with urgent needs. The loan index is determined according to the source of credit funds of a country's bank and the country's fiscal and financial policies, loan principles and industrial policies. China's loan limit management is based on the principles of the socialist commodity economy and draws on the experience of the Soviet Union. With the reform of China's economic operating mechanism and economic management mechanism, China will gradually reduce the scope of loan limit management, but it will never The loan limit will be cancelled. ^[1]

Loan limit

The loan limit is

Reform the deposit reserve system

The first is to cancel interest payments on statutory and excess deposit reserves. China's higher interest payment on reserve deposits is a necessary compensation system for commercial banks to implement credit scale control under the planned economy system. However, after the credit scale control was cancelled, statutory deposit reserves and excess reserves for commercial banks The institutional basis for paying interest has ceased to exist. The second is to improve the provision method of reserves. The first is to stipulate different reserve ratios for different types of deposits. Since the purpose of the reserve is to ensure that commercial banks can have sufficient solvency when they encounter bank withdrawals from customers, the term of the client's deposit is different, and the withdrawal of the reserve should also be different: the shorter the term of the deposit The stronger the currency, the higher the reserve ratio. Conversely, the longer the term of a deposit and the weaker its currency, the lower the reserve ratio is required; the second is to change the basis of the reserve and use the daily average deposit balance of the financial institution instead of the balance at the end of the month or the end of the month as The basis for accruing reserves to avoid human manipulation. The third is to moderately reduce the frequency and magnitude of the adjustment of the reserve ratio, so that the regulatory effect of monetary policy instruments is relatively stable. The fourth is to implement a differential deposit reserve system in different regions, and determine higher deposit reserve ratios for regions with relatively abundant funds, and lower deposit reserve ratios for regions with insufficient funds.

Increase the intensity of open market operations

In the operation of the RMB market, we should focus on improving the government bond market, optimizing the assets and maturity structures of central banks and financial institutions, and relaxing the qualification restrictions on government bond holders, thereby increasing the proportion of government bond assets and expanding the size of the government bond market; In addition, as the continuous and rapid growth of foreign exchange reserves has increased the central bank s base currency investment, the threshold for the free use of foreign exchange for enterprises and individuals must be lowered, and foreign exchange reserves must be diverted to ease the pressure on foreign exchange accumulation, and foreign exchange should be pooled by the state. The transfer to private decentralized storage will increase the direction of foreign exchange flows, thereby further enhancing the endogenous nature of the money supply and making the central bank more active and proactive when conducting open market operations.

Actively promote the marketization of interest rates

The first is to improve the pricing power of commercial banks. The independent pricing power of commercial banks is a prerequisite for the marketization of interest rates. Under the condition that the interest rate is officially set, commercial banks passively implement the central bank's unified determination of the loan interest rate and its floating range, and interest rate management is relatively simple. After the marketization of interest rates, commercial banks must follow the supply and demand conditions of the capital market and their own costs. As well as the credit situation of credit customers to set the appropriate interest rate, the ability of interest rate pricing will become the key to the operation and development of commercial banks. The second is to further expand the depth and breadth of the financial market. A sound financial market is the basic condition for the marketization of interest rates. The interest rate instrument ultimately affects the total social demand through various transmission channels of the financial market. Therefore, the marketization of interest rates must rely on developed financial markets. Expanding the breadth of financial markets refers to the development of many different markets including government bond markets, financial institution interbank markets, commercial paper markets, bank acceptance markets, stock markets, fund markets, insurance markets, financial leasing markets, foreign exchange markets, and gold markets. The huge system including the market; expanding the depth of the financial market means creating more products, tools and services in the financial market to enrich the financing channels of the entire market and gradually promote the marketization of interest rates. The third is to develop the interest rate derivative market, which is a supplementary condition for the marketization of interest rates. As interest rate marketization accelerates, interest rate risk will also increase, and various interest rate risk management tools must emerge.

Making the most of rediscount policy tools

First, vigorously promote the commercialization of social credit bills. The establishment of a standardized and open bill market is the basis for the role of rediscount policies. When cultivating and developing the bill market, we must first properly guide companies to use commercial bills of exchange. The central bank may choose some strong and reputable companies to promote the use of commercial acceptance bills, and implement the policy of discounting and rediscounting such bills to promote the development and development of the commercial bill market. Secondly, commercial banks should further improve and improve the management of bill acceptance and credit business. While focusing on risks, for some high-credit companies, appropriately relax the approval procedures, encourage enterprises to implement commercial bill settlement methods, and consciously overcome illegal operations. To ensure that enterprises can obtain funds through discounts in a timely manner when using commercial bills of exchange. Third, the People's Bank of China should further relax the restrictions and scope of rediscount bills, moderately increase the proportion of rediscounts, standardize the rediscount operation procedures, and ensure that the bills obtained by commercial banks in the discount market are financed by rediscounts and enhance asset flows In order to realize the reverse incentive effect of rediscount on the development of the bill market. The second is to further strengthen the legal system of discounting and rediscounting, increase sanctions against operators in violation of regulations, strengthen operability and standardization, and ensure and promote the effect of rediscounting policies.

Banks increase loan quota

As the economy improves, the bank's loan quota increases year by year. ^[2]