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%.