China's central bank will tighten its oversight on money market debt issued by big banks as part of its efforts to curb financial system risk, the South China Morning Post reported Aug. 14.

In its second-quarter monetary report, the People's Bank of China, or PBOC, said it will include negotiable certificates of deposit,or NCDs, issued by banks with over 500 billion yuan in assets as part of their interbank liabilities under the macro-prudential assessment. The central bank will implement the move starting from the first quarter of 2018.

The central bank had previously said it was considering requiring banks to reclassify NCDs as interbank liabilities.

Smaller banks will be exempt form the first round of the test but the PBOC will continue to monitor them.

These smaller banks had quickly latched on to NCDs after the central bank introduced the products in 2013 to facilitate interest rate liberalization. The smaller banks used the proceeds from selling large volumes of NCDs to buy each other's wealth management products and NCDs. By the end of July, the value of outstanding NCDs had grown to 8.43 trillion yuan, making up 13.2% of China's bond market.