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China strengthens capital management rules for banks

BEIJING: China’s financial regulator is beefing up capital rules for banks to combat financial risks, the National Financial Regulatory Administration said in a statement on Wednesday (Nov 1).

The move, which will come into effect on Jan 1, aims to help banks improve risk management and better serve the economy, the regulator said.

The measures, which follow draft versions seeking public feedback released in February, will make banks’ capital adequacy ratios more accurately reflect their overall risks, it said.

Chinese banks are under government pressure to support a faltering economy, while also improving their resilience amid a property sector crisis and local government debt risks.

The rules establish a differentiated capital supervision system that imposes higher capital requirements on larger banks and those with the higher proportion of overseas businesses.

Banks will also need to set aside higher loss provisions for non-credit assets. They will be given a grace period of two years before they must be fully compliant with the new provisioning requirements, the regulator said.

It also specified risk control measures for banks’ exposure to mortgage lending based on property type and source of repayment.

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