China’s banking regulator may require the nation’s biggest lenders to boost their capital adequacy ratios to as high as 15 per cent by the end of 2012, a person with knowledge of the matter said.
The regulator is drafting a plan that would call for Tier 1 capital of 8 per cent, with the overall ratio set at 10 per cent, the person said. The plan would add a buffer of up to 4 per cent to protect against economic fluctuations, plus a further 1 per cent for “systemically important” banks. The biggest banks must currently meet an 11.5 per cent ratio.
China’s rules would be stricter than capital requirements announced on September 12 by the Basel Committee on Banking Supervision in response to the global financial crisis. The country has moved to rein in risk-taking among banks this year after last year’s record $1.4 trillion of new loans fanned concerns about the financial system’s ability to withstand future stress.
“This is quite onerous and I’m surprised they are going this far,” said Michael Werner, a Hong Kong-based analyst at Sanford C Bernstein & Co. “Given the risks, maybe they feel they’d rather be erring on the conservative side.”
The China Banking Regulatory Commission’s plan would require lenders to have common equity equal to at least 6 per cent of risk-weighted assets, the person said, declining to be identified.
A CBRC press official, who declined to be identified, citing agency policy, wasn’t immediately able to comment. Spokespeople at Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd — the country’s four largest lenders — either declined to comment or weren’t available.
