, China
Photo by Zhang Kaiyv via Unsplash.

Revised capital rules a positive for Chinese banks’ operating environment

It is expected to have minimal impact on local banks’ capital position.

China’s revised capital rules for commercial banks will have minimal impact on local banks’ capital positions, reports Fitch Ratings.

Successful implementation could be a positive for the sector’s operating environment in the future, the ratings agency said in a commentary.

On 18 February, the local banking regulator launched a draft consultation on new capital rules implementing the final Basel III standard for large- and medium-sized commercial banks. Targeted to take effect on 1 January 2024, the new measures classifies banks into three buckets based on their balance sheets and international exposures.

The rules for the largest banks that fall into the first bucket  are closely aligned with the final Basel III framework, except for more conservative risk weights for certain assets, Fitch noted.

“This will enhance the risk sensitivity of their capital management and improve the comparability of their capital ratios and public disclosures in a global context,” the ratings agency said.

Capital rules for the second-bucket banks are reportedly more simplified and largely unchanged from current requirements.

The smallest banks, or those belonging in the third bucket, will be subject to the most simplified capital and disclosure standards. The new rules do not lower their current capital requirement.

ALSO READ: Rising mortgage prepayment trend pressures Chinese banks’ profits

Fitch believes that the tiered supervision shows China’s efforts to “strike a balance between improving the resiliency of the banking sector and limiting the cost of regulatory compliance on smaller banks.”

“We consider the change in the calculation method for credit risk as most significant because credit risk accounts for most of Chinese banks’ risk-taking activity, although this will have limited impact on ratings,” Fitch said.

It added that those using the revised standard will enjoy a modest capital uplift and lowered risks from specific credit exposures to economy-supporting sectors.

“Still, the potential capital uplift from more favourable treatment for the risk exposure will be partly offset by the higher risk weights for several other exposure types that may be more interconnected with the financial system,” Fitch said.

Follow the link for more news on

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


Bank DBS Indonesia avails fast, reliable and sustainable corporate banking
Its ESG-based bank financing, as reflected in sales and asset under management, proves to be an IDR1.8t (US$117m) success.
Italy brings its strong suits to Singapore’s fintech expo
Italian trade executive says 9 firms at the Singapore Fintech Festival 2023 exemplify the diverse range of products and expertise Italy can bring to the table.
Digibank by DBS sets new digital banking standards
Apart from speed and convenience, DBS stays ahead with exceptional personalisation, open banking, and enhanced security.