Financial Regulatory Forum

Basel III: Chinese banks saving for new capital adequacy ratio

By Helen H. Chan

HONG KONG, Aug. 26 (Business Law Currents) – New capital adequacy rules from the China Banking Regulatory Commission (CBRC) are prompting banks to hit up investors in Hong Kong and Shanghai’s capital markets. Part of the Basel III implementation process, the rules will require Chinese lenders to shore up additional capital to protect against credit risks.

Under the new rules, which are currently open to public review, systemically important banks in China will be subject to a minimum capital adequacy ratio (CAR) of 11.5 percent; other banking institutions will be required to adhere to a minimum CAR of 10.5 percent.


ANALYSIS-Implementation key to Basel III success

By Huw Jones

LONDON, Sept 12 (Reuters) – The global “Basel III” deal on bank capital standards was reached at lightning speed by usually glacial regulators — substantive negotiations took about a year, compared to a decade for the current Basel II rules.

But implementing the new standards consistently over the lengthy phase-in period will be a headache for national regulators, and determine whether Basel III succeeds better than its predecessor in reducing bank sector risk.

* The Basel III rules are much tougher than Basel II, which failed to ensure banks held enough capital to withstand the worst financial crisis since the Great Depression.

COLUMN-Stress tests and cargo cults: James Saft

(James Saft is a Reuters columnist. The opinions expressed are his own)

By Jim Saft

HUNTSVILLE, Ala., July 8 (Reuters) – How are European officials orchestrating the bank stress tests like Pacific islanders speaking into coconuts and waiting for cargo to drop from the skies?

They both make the elemental error at the heart of all cargo cults; they mistake necessity for sufficiency and hope that imitation and affect will make up for a lack of substance.


BREAKINGVIEWS – Where’s America’s home equity loan Armageddon?

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Rolfe Winkler

NEW YORK, April 7 (Reuters Breakingviews) – The biggest U.S. banks hold tens of billions of dollars of underwater second-lien loans. By all rights, these look like risky credits. Lenders have managed to avoid writing them down because borrowers are making payments. But muddling through is a risky strategy. Regulators would be wise to force them to hold more capital against these loans.

In total, U.S. commercial banks hold more than $700 billion of second-lien mortgages, also called home equity loans. Many were used to turn houses into ATMs, others to finance down payments. Typically subordinate to first mortgages, many of these look vulnerable to write-downs, as the homes are worth less than debt owed on them.

Banks should hold more capital for risk -Santander

    LONDON, Feb 23 (Reuters) – Spain’s Santander <SAN.MC>, Europe’s second biggest bank, said forcing banks to hold more capital to cover riskier activities would be better than forcing the break-up of big lenders. (more…)

Regulatory cloud hangs over bank hybrid bonds

   By Jane Merriman
   LONDON, Feb 3 (Reuters) – European regulators want banks to boost their capital to protect against shocks but uncertainty about what type of hybrid bonds will qualify as Tier 1 capital is keeping a lid on new issues. (more…)

Turkey plans to pass capital reforms by end-March

    ISTANBUL, Dec 22 (Reuters) – Turkey plans to pass a European Union-sought capital markets reform bill through parliament  before the end of March at the latest, the Capital Markets Board chairman said on Tuesday. (more…)

China banks need $73 bln capital in 2010 -regulator

Chinese banks need more capital

Chinese banks need more capital

   By Samuel Shen and Edmund Klamann
   SHANGHAI, Dec 21 (Reuters) – Chinese banks may need to raise about 500 billion yuan ($73 billion) from the capital markets next year as rapidly expanding loans weaken their financial strength, a senior banking regulator said, marking the first official estimate of banks’ near-term fund-raising. (more…)

BREAKINGVIEWS-FSA too weak on hybrid capital

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own – 
   By George Hay
   LONDON, Dec 11 (Reuters Breakingviews) – The Financial Services Authority needs to be tougher on bank capital. The UK regulator is considering allowing banks to count their current stock of hybrid securities as part of loss-absorbing reserves for another decade, and potentially longer. Such a grandfathering goes against the FSA’s policy goal of improving the quality of bank capital. (more…)

S.Korea says to guide banks to retain more profits

    SEOUL, Dec 10 (Reuters) – The South Korean government will guide local banks to retain more profits next year, instead of paying dividends to shareholders, to help bolster their capital. (more…)