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UPDATE 1-China central bank says to tighten oversight of company debt, bank assets

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BEIJING, Feb 17 (Reuters) - China's central bank said on Friday it plans to tighten up its oversight in a range of areas including corporate debt and bank assets, as policymakers fret over fast-rising leverage and the risk of asset bubbles in the rapidly growing economy.

The People's Bank of China (PBOC) also said it will keep the yuan currency basically stable while maintaining a prudent and neutral monetary policy.

"We will increase monitoring of corporate debt risk, bank asset quality and liquidity, abnormal stock market fluctuations, use of insurance funds, property bubble risks...and cross-border capital flows," the central bank said in its fourth-quarter monetary policy implementation report.

China has relied on rapidly increasing credit to fuel economic growth in recent years, but policymakers have begun to point to the threat of asset bubbles forming.

Home prices rose rapidly in many Chinese cities last year, leading to new restrictions on purchases and lending in dozens of cities since October.

The central bank said on Friday that China should restrict lending for property market speculation and build a long-term mechanism for the healthy development of the housing market.

Top leaders in December vowed to focus on controlling financial risks this year, and the central bank has moved to a tightening bias in recent months, including raising the rate on the unofficial policy rate on Feb. 3. The PBOC on Friday also said it will increase two-way flexibility of the yuan while keeping the currency basically stable.

China's yuan fell 6.5 percent last year against the dollar and is expected to weaken further this year, as policymakers respond with tighter restrictions on capital outflows.

(Reporting by Beijing Monitoring Desk; Editing by Hugh Lawson)

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