Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Regulation and Compliance > Federal Regulation

China Sets Tough New Rules for Bank Capital

By Marlene Y. Satter

X
Your article was successfully shared with the contacts you provided.

The China Banking Regulatory Commission (CBRC) has released a draft of some tough new regulations for the nation’s financial institutions. According to a Reuters report, the new rules are aimed at helping to implement Basel III requirements.

The new regulations include a measure that subjects the big banks, also known as systemically important financial institutions (SIFIs), to a minimum capital adequacy ratio (CAR) of 11.5% under "normal conditions." If the CBRC, however, feels that credit growth is too strong, a 14% rate could kick in, along with a countercyclical requirement of up to 2.5%. This goes into effect in early 2012; banks must meet these requirements by 2013.

Non-SIFIs (smaller banks) will be required to carry a CAR of 10.5%, with no countercyclical requirement. The minimum core tier 1 CAR requirement in the new regulations is higher than that set by Basel III, at 5% to Basel’s 4.5%.

Another added regulation is a new leverage ratio of 4% of on- and off-balance-sheet tier 1 capital; this also goes into effect in early 2012, and is higher than the 3% required by Basel III. SIFIs must meet the new requirement by the end of 2013, while non-SIFIs have until the end of 2016 to comply.

Liquidity coverage ratios (LCRs), which are the ratios between high-quality liquid assets and net cash outflows for a 30-day period, will be required for all banks by the end of 2013 to be 100% or more. So will the net funding ratios (NFRs), which are the ratio between usable stable funding sources and needed stable funding sources.

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.