China proposes overhaul of commercial banks’ risk-exposure rules as it looks to strengthen financial system
- The differentiated risk weightings for assessing banks’ capital adequacy ratios can more accurately reflect overall risk levels and capacity for operating sustainably
- The proposed rules, which are now open to public consultation, are expected to be implemented next January
China’s banking regulator plans to introduce differentiated risk weightings to better reflect and assess banks’ risk exposure, to prevent risks in the nation’s financial system.
By setting risk weightings, banks’ capital adequacy ratios can more accurately reflect their overall risk levels and capacity for continuing sustainable operations, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement late on Saturday.
“As China has a large number of banks of different nature and sizes, to better match capital adequacy requirements with their risks, there needs to be differentiated treatments on information disclosure and calculation of risky assets,” a spokesman said in the statement.
The revision was initiated in light of announcements by the Basel Committee on Banking Supervision on new regulatory demands and the need for consistency in regulatory assessments across banking supervisory bodies.