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China Refines Capital and Risk Management of Commercial Banks

China's banking regulator and central bank plan to adopt a differentiated regulatory system for assessing commercial banks' capital adequacy and risk management to prevent risks in the country's financial system. The new rules will guide banks to serve the real economy better.

China Central Bank
China Central Bank

China's banking regulator and the central bank plan to adopt a more differentiated regulatory system to assess commercial banks' capital adequacy and risk management. This step aims better to prevent risks in the country's financial system.

New Rules to Guide Banks to Serve Real Economy

The China Banking and Insurance Regulatory Commission and the People's Bank of China jointly released amended draft rules that aim to help banks continuously improve the precision of risk measurement and guide them to serve the real economy better.

Banking Sector Brings Closer to Global Standards

The draft rules bring the banking sector closer to global standards by dividing lenders into three groups based on a business scale and risk level. The rules will apply a differentiated regulatory system to banks, with lenders with a relatively large scale of assets or cross-border business facing stricter capital requirements and having to disclose more information to regulators.

Yi Yang, Chairman of the People's Bank of China
Yi Yang, Chairman of the People's Bank of China

Risk Exposure to Mortgage Lending Measured

The rules will also include more specific factors to measure banks' risk exposure to mortgage lending, such as property types, sources of repayments, and loan-to-value ratios.

China's Property Market Slows Sharply

Once a pillar of growth, China's property market has slowed sharply over the past year due to fragile demand and mounting debt defaults by developers.

Capital Adequacy Ratios in Banking Sector Remain Unchanged

The two regulators stated that implementation of the new rules would leave capital adequacy ratios in the banking sector generally unchanged, with ratios for some banks changing slightly.

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