WHOLESALE BANKING | Cesar Tordesillas, China

China sets new capital rules for commercial banks

China placed its banks under the regulatory supervision within the Basel III framework starting Jan.1, 2013.


The decision was made by an executive meeting of the State Council, presided over by Premier Wen Jiabao, after hearing the report by the China Banking Regulatory Commission.

Banks will be given a grace period of 10 years to clean up their unqualified capital tools that have already been sold, according to a statement.

Under new regulations agreed upon by G20 leaders in 2011, systematically important banks will be subject to a capital adequacy ratio  of 11.5 percent, while other banks will be subject to a CAR of 10.5 percent. Both requirements remain unchanged from the country's existing regulatory rules.

The new regulations allow commercial banks to take in reserves for excess loan losses as capital and define a series of "qualified standards" for capital tools such as subordinated bonds.

Banks are required to expand the scope of their risk supervision framework, adding operational risks into the current one that highlights credit and market risks, according to the statement.

The new regulations also clarify rules that encourage banks to carry out financial innovation and increase loans for small businesses and individuals to support the real economy.

Banks should properly control credit expansion in the transitional period, the statement said.

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