PBoC raised overseas lending leverage ratios for selected banks, accelerating RMB internationalization policy momentum but remaining gradual

Overview

This report interprets the adjustments by the PBoC and SAFE to macroprudential rules for overseas lending of selected domestic banks. The key change is an increase in the overseas lending leverage ratio and the lower quota limit for onshore foreign banks and the China Exim Bank. Nomura views this move as part of a recent sequence of PBoC policies promoting cross-border RMB use, easing RMB appreciation pressure, and supporting corporate overseas financing, suggesting that RMB internationalization has become a more important policy direction in 2026.

Core views

The core views of the report are: first, the policy is mainly aimed at foreign banks and the China Exim Bank, not all domestic commercial banks, indicating that regulators seek to balance support for cross-border financing with macroprudential discipline. Second, recent rapid panda bond financing growth by foreign banks requires higher overseas lending quotas to channel domestic RMB funding into overseas lending. Third, the expansion of the China Exim Bank quota is consistent with policy goals on exports and imports, Belt and Road cooperation, and cross-border RMB use supported by the Ministry of Commerce. Fourth, although the RMB has been strong recently, the PBoC is likely to take a gradual path in promoting internationalization and to avoid excessive RMB appreciation.

Analysis framework

The report analyzes multiple dimensions, including policy rules, affected institutions, quota calculation formulas, panda bond financing data, RMB exchange-rate performance, FX settlement and sale behavior, and wording in the 15th Five-Year Plan. The authors place this adjustment within a broader sequence of recent PBoC measures, including the February cross-border interbank RMB financing framework, the February cut in FX forward FX sale reserve ratio, the March increase in macroprudential parameters for corporate overseas loans, and this overseas lending leverage ratio adjustment.

Methodology notes

• Macroprudential managementOverseas lending balance cap formula

  The overseas lending balance cap equals net tier-1 capital or branch working capital for foreign banks multiplied by the overseas lending leverage ratio, and then multiplied by the macroprudential adjustment factor.

  This formula determines the maximum overseas lending balance a bank can maintain at any time; foreign-currency loans are converted into RMB using the disbursement FX rate and multiplied by the FX risk conversion factor, while genuine cross-border settlement trade-finance loans are not counted toward the quota.

• Policy transmission analysisRMB internationalization policy chain

  By expanding cross-border RMB financing, overseas lending, and offshore RMB use, increase the share of RMB used in trade, investment, and financing.

  The report analyzes this policy together with cross-border interbank RMB financing, corporate overseas lending quotas, panda bond issuance, and support for Belt and Road financing in a single policy transmission chain.

• Foreign exchange flow analysisSettlement rate, sale rate, and central bank FX purchases

  Corporate and household FX settlement and sale behavior affects RMB liquidity and exchange-rate pressure, and the PBoC can use FX purchase operations to smooth liquidity disruptions.

  The report notes that in March, the settlement rate rose to 71.0% and the sale rate rose to 63.3%, while the PBoC recorded three consecutive months of net FX purchases to avoid passive liquidity tightening during the RMB appreciation cycle.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RMB

  Core asset directly affected by policy

  Strengths

  Policy supports cross-border RMB financing and offshore RMB use, and RMB has recently performed strongly versus both the currency basket and USD.

  Weaknesses

  Domestic economic conditions remain weak, interest differentials are relatively wide, and capital outflow pressure has not been fully removed.

  Comparison

  RMB showed greater resilience than some peer currencies after the Iran conflict, appreciating despite a stronger USD index.

  Risks

  If RMB appreciation is too rapid, it may not align with Beijing’s growth and trade-balance objectives.

• Panda bonds

  A policy-supported financing channel

  Strengths

  Q1 net financing reached a record high, with meaningful contribution from foreign bank issuance.

  Weaknesses

  Converting financing into offshore loans remains constrained by bank quotas, risk controls, and cross-border supervision.

  Comparison

  Q1 net financing of RMB 67 billion is significantly higher than RMB 32 billion in Q4 and Q1 of 2025.

  Risks

  If market risk appetite weakens or RMB expectations deteriorate, panda bond issuance and fund utilization may slow.

• Foreign bank businesses in China

  Primary beneficiaries of expanded overseas lending quotas

  Strengths

  Increasing leverage from 0.5x to 1.5x makes it easier to deploy domestic RMB funding for overseas lending.

  Weaknesses

  The PBoC notes that capital size of onshore foreign banks is relatively small, so absolute quota expansion may be limited.

  Comparison

  In percentage terms, the increase for foreign banks is larger, but the report believes the China Exim Bank’s absolute quota expansion may be bigger.

  Risks

  If overseas lending balances approach the new cap, new lending may need to pause until balances decline.

• China Exim Bank

  Targeted institution with upward-adjusted quota

  Strengths

  Its leverage ratio was raised from 3.0x to 3.5x and is aligned with policies supporting import-export and Belt and Road financing.

  Weaknesses

  It remains constrained by the macroprudential framework and overseas lending balance cap.

  Comparison

  The China Development Bank leverage ratio remains at 1.5x and was not included in this adjustment.

  Risks

  If policy financing expands too quickly, it could increase project quality, cross-border credit, and FX risks.

Key data

• Foreign bank overseas lending leverage ratioRaised from 0.5x to 1.5xApplicable to wholly foreign-owned banks, Sino-foreign joint venture banks, and foreign bank branches in China, as well as Hong Kong and Macau/Taiwan financial institutions established in the mainland.
• China Exim Bank overseas lending leverage ratioRaised from 3.0x to 3.5xThe report believes its policy-bank profile and Belt and Road financing mandate are key reasons this institution was specifically included.
• Overseas lending quota floorRaised from RMB 2 billion to RMB 10 billionIf the calculated cap is below RMB 10 billion, this new floor applies.
• Macroprudential adjustment factor1.0xNot adjusted in this round.
• FX risk conversion factor0.5xNot adjusted in this round.
• Q1 2026 panda bond net financingRMB 67 billionNomura estimates this using Wind data; it is a new quarterly high and above RMB 32 billion in Q4 2025 and Q1 2025.
• Panda bond outstanding balanceRMB 490 billionAs of end-Q1 2026, up 39.6% year-on-year.
• Foreign bank panda bond net financing contributionRMB 24 billion, 35.4% of the totalEuropean and Asian foreign banks were the largest contributors.
• CFETS RMB basket performanceAppreciated 1.7% from February 27, 2026 to April 10, 2026The report says RMB remained strong versus a currency basket after the Iran conflict.
• Offshore RMB versus USD performanceAppreciated 0.73% since the conflictIn the same period, onshore RMB versus USD appreciated 0.55%.
• March settlement rate71.0%Higher than February’s 66.5%, and the highest since September 2025.
• PBoC net FX purchasesJanuary USD 7.6bn, February USD 12.2bn, March USD 9.6bnThe report states the PBoC resumed net FX purchases from January, ending a previous streak of 21 months of net FX sales.

Impact & implications

The policy impact appears in three ways: first, it enhances the RMB financing capacity of foreign banks and the China Exim Bank for overseas enterprises, cross-border trade, and Belt and Road projects; second, it provides more room to channel domestic panda bond financing into offshore RMB lending; and third, it supports offshore RMB use and internationalization without broadly loosening system-wide bank leverage and risk controls. For the market, this policy looks more like part of a package linking RMB internationalization and exchange-rate management rather than simple credit easing.

Risks

• Domestic economy remains weak, which may limit the speed of RMB internationalization progress.
• A relatively wide domestic-foreign interest differential and ongoing capital outflow pressure may still constrain PBoC policy space.
• If RMB appreciates too quickly, it may not resolve trade imbalances or effectively attract capital inflows.
• Overseas lending expansion may bring cross-border credit risk, FX risk, and project implementation risk.
• The policy remains targeted; if quotas of other banks are not relaxed, overall credit expansion effects may be limited.

What to watch

• Whether overseas lending balances of foreign banks and the China Exim Bank continue to approach the new cap.
• Whether panda bond issuance and net financing remain elevated in subsequent 2026 quarters.
• Whether the PBoC continues to introduce further policies supporting cross-border RMB financing and the offshore RMB market.
• Whether CFETS RMB basket, USD/CNY, and CNH moves indicate continued RMB appreciation pressure.
• Whether SAFE settlement rate, sale rate, and bank agency settlement data reflect changes in capital flows.
• The specific implementation details in the 15th Five-Year Plan on capital account opening, cross-border payment infrastructure, and the offshore RMB market.