Window Guidance Issued for Investment Activities at Some Small and Medium Banks, Bond Allocation Strategies May Adjust

Sources familiar with the matter report that recently, some small and medium-sized banks received window guidance regarding financial investment activities. The guidance stipulates requirements such as ensuring the growth rate of financial investments does not exceed that of loans, and the duration of newly issued bonds must not exceed the existing portfolio duration. Emphases, forms of guidance, and enforcement intensity vary by region. Amidst pressure on net interest margins and insufficient effective credit demand, bond investments have become an important avenue for some small and medium-sized banks to supplement returns in recent years. Some interviewees believe this round of guidance aims to guide banks to support the local real economy while preventing interest rate risks from excessively extending bond durations. As relevant requirements are implemented, some banks are reassessing their bond allocation pace and term structure.