According to Security Times, the regulatory authorities have indicated unofficially they are to raise the Capital Adequacy Ratio (CAR) for small and medium sized banks to 12 percent. According to bank insiders, adjustments will be made to the quantity and structure of credit.
"In a meeting in the first half of this year with small and medium sized banks, the regulatory authority mentioned that the CAR of these banks should reach 12 percent", a board administration official from a city commercial bank in south China told journalists. Another city commercial bank in west China also confirmed the same news. But until the regulatory authority makes an official announcement, a 10 percent CAR is still the bottom line.
According to some bankers, the increase of CAR to 12 percent will put most banks under pressure. Due to large disbursements over a short period in the first half of the year, CARs of most banks have probably already fallen below 12 percent, with some banks close to 10 percent.
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(China.org.cn by Li Xiaohua August 5, 2009)