China shadow banking: dancing in the dark
HONG KONG/NEW YORK, Feb. 8 (Business Law Currents) – Uncertainty over the exact size of China’s underground private financing activities, also known as the shadow banking industry, is causing concerns among international investors as well as the Chinese government.
Restrictions on bank lending to China’s small-to-medium enterprises and to the real estate sector over the past few years have driven many of these businesses to seek alternative methods of financing from larger cash-rich entities. This demand for funding has in turn prompted the development of non-bank financiers such as trust companies and private short-term financing service providers. (more…)
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.
On 15 August 2011 the China Banking Regulatory Commission (CBRC) released new draft guidelines regarding commercial banks’ capital requirements.
The draft guidelines set out how China aims to comply with the higher capital standards set by Basel III.
The draft guidelines set out the new, layered, capital adequacy requirements:
1. “Minimum capital requirements” for all banks: Tier 1 capital adequacy requirement of 6% (of risk weighted assets), of which 5 percentage points must be “core” Tier 1 capital; and combined Tier 1 and 2 capital adequacy ratio of 8% (of risk weighted assets)
2. In addition all banks will be required to keep a “capital conservation buffer” of 2.5%
3. systemically important banks are required to hold an additional 1% of capital; that gives a total minimum capital adequacy ratio under “normal conditions” of 11.5% for systemically important banks, and 10.5% for non-systemically important banks
4. In addition the regulator will impose an additional “countercyclical buffer” of between 0 – 2.5% during times of excessive credit growth.
George Lekatis
http://www.basel-iii-association.com
China bank chief gets tough on property, land loans
By Langi Chiang and David Stanway BOAO, China, April 11 (Reuters) – China’s banks must report on the quality of their loan books by the end of June and take fresh steps to rein in risky lending to land developers, the chief banking regulator said on Sunday. (more…)
EXCLUSIVE – China tells banks to ensure loans are used properly
SHANGHAI, Feb 1 (Reuters) – China’s banking regulator has ordered lenders to conduct checks on whether any of their loans have illegally gone into the stock or property markets, a banking source told Reuters on Monday, the latest step in a clampdown on excessive lending and rising asset prices.
Credit found used for improper purposes must be withdrawn within a certain period of time, said the source, who had seen the relevant notice from the regulator. He did not elaborate on the timeframe.
The order from the China Banking Regulatory Commission (CBRC) marks further efforts by Beijing to rein in rampant lending and ensure that credit is being used to generate genuine economic activity and not simply to fuel speculation in stocks and property.
“The CBRC has recently found that some banks have loosened management of their lending practices, some industrial companies have illegally used bank credit to invest in stocks and property, while some individuals have used consumer loans to trade stocks,” said the source.
It is not unusual for the CBRC to issue such orders, though it is unclear how it will actually implement them.
For instance, it leaned on banks to cut back on short-term bill issuance last year after a spike in such credit at the start of the year, and has said in public statements over the past year that loans must be used for real economic purposes such as investment or purchasing property or goods.
Still, the order follows a series of steps over the past weeks to curb credit growth, demonstrating authorities’ seriousness about preventing a flood of credit that could fuel asset price bubbles and rising inflation expectations.
China tells some banks to halt new business-report
BEIJING, Sept 3 (Reuters) – China’s banking regulator is refusing to allow banks with a capital adequacy ratio below 9 percent to start new lines of business or open new branches, a government researcher said in remarks published on Thursday. (more…)
China may tighten banks’ capital rules – sources
SHANGHAI, Aug 3 (Reuters) – China’s banking regulator, concerned record lending could lead to a spike in bad loans, may tighten banks’ capital rules by excluding subordinated bonds they sell to other banks from their capital base, sources said Monday. (more…)
In China, banks chafe at derivatives drive
By Eadie Chen and Jonathan Leff BEIJING/SINGAPORE, July 27 (Reuters) – While Washington pursues a high-profile overhaul of its derivatives markets, a more modest but equally important crackdown is underway in China. (more…)
China tells banks to ensure loans enter real economy
BEIJING, July 27 (Reuters) – Chinese banks must ensure that loans they issue for investment projects are actually being put to use in the real economy, the country’s banking regulator said on Monday.
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