Banks should control liquidity risks: PBOC

China's central bank on Monday told the country's overextended lenders to manage liquidity risks to stabilize the monetary environment.

In a circular posted on the People's Bank of China (PBOC) website, the central bank said the country's liquidity stance remains at a reasonable level.

However, with multiple changing factors in the financial system, including regularly high borrowing demands in the middle of the year, commercial banks should strengthen liquidity management.

The statement comes as short-term interbank rates rose steeply in the past two weeks, but the PBOC has been reluctant to pump cash into the money market, a necessary move to restrain the lending binge, which is blamed for inflating the asset bubbles.

Banks should allocate positions beforehand and keep abundant reserves. Prudence is needed to arrange asset portfolios and control the liquidity risks arising from the credit binge, the circular said.