New rule for commercial banks' capital management

BEIJING - The Chinese government on Wednesday adopted new regulations concerning commercial banks' capital management, putting the country's lenders under the same regulatory supervision within the Basel III framework, a set of new global banking requirements agreed upon by G20 leaders in 2011.

After hearing the report by the China Banking Regulatory Commission, the State Council, China's Cabinet, decided at its executive meeting presided over by Premier Wen Jiabao that the pilot regulations on commercial banks' capital will take effect as of Jan 1 next year.

According to the regulations, systemic important banks will be subject to a regulation of 11.5 percent in capital adequacy ratio, while other banks will be subject to a ratio of 10.5 percent.

The new capital adequacy ratio requirement remains unchanged from China's existing regulatory rules.

The new regulations allow commercial banks to take in reserves for excess loan losses as capital and define a series of "qualified standards" for capital tools such as subordinated bonds.

Banks will be given a grace period of 10 years to clean up their unqualified capital tools that have already been sold.