Smaller Chinese banks rush to trim lending

BEIJING, June 30 (Reuters) - Smaller Chinese banks have been scrambling to trim their loan books before the end of June to satisfy regulators that their loan-to-deposit ratios are not too high, Chinese media reported on Tuesday.

Deposit growth has been slowing at smaller lenders at the same time as they have heeded the government's call for looser credit and extended a record number of loans, raising concerns about their capital cushions.

China requires that lending by banks should not exceed 75 percent of their total deposits.

To meet this requirement, smaller banks have had to transfer a range of assets, particularly short-term bills, to bigger banks and other financial institutions with more capital on hand, Caijing magazine reported on its website.

"The end of the month has been very busy for us with transferring bills and reducing the scale of our lending," it quoted an official at a smaller bank as saying.

Smaller banks have fewer branches and a weaker customer base than their bigger peers, making it tough for their deposit base to grow in tandem with the surge in lending.

New lending by Chinese banks is likely to hit 1.2 trillion yuan ($175.6 billion) in June, local media reported.

Chinese banks in the first five months extended loans totalling 5.84 trillion yuan ($855 billion), easily topping the government's full year minimum target of 5 trillion yuan. (Reporting by Aileen Wang and Simon Rabinovitch; Editing by Ken Wills)