Top banking regulator sets new rules on 3 banks

China's top banking regulator launched new rules on three State-owned policy banks on Wednesday, requiring them to establish a capital restraint mechanism with the capital adequacy ratio as a core regulatory indicator.

The strengthening of capital supervision aims to help the three banks, namely China Development Bank Corp, the Export-Import Bank of China and Agricultural Development Bank of China, improve their ability to prevent and hedge risk, said Xu Qinghong, deputy head of the policy banks supervision department at the China Banking Regulatory Commission.

In principle, the regulatory authority will set requirements on capital adequacy ratios for the three policy banks by taking reference of the requirements on commercial banks, Xu said.

The CBRC also required CDB and China EximBank to strengthen management of country risks, compliance risks and overseas lending risks while they support Chinese companies expanding their business globally.

CDB has six representative offices overseas, and China EximBank had three representative offices abroad, plus a branch in Paris, as the end of 2016.

Both banks should step up compliance management, completely understand the operational and financial status of their clients, strictly observe the environmental and industrial regulations of host countries, and strengthen communication with local regulators, said Zhou Minyuan, head of CBRC's policy banks supervision department.

As of the end of September, total assets of the three policy banks reached 25.12 trillion yuan ($3.79 trillion). The banks extended loans of 1.42 trillion yuan to projects related to the Belt and Road Initiative, which aims to promote the connectivity of the Asian, European and African continents and their adjacent seas, and 2.36 trillion yuan to support Chinese companies going global.