CBRC sets bank ratio targets

Shanghai Daily, April 27, 2011

China's top banking regulator said Tuesday it has set different capital adequacy ratio targets for its five biggest lenders and reiterated that the regulatory minimum ratio is 11.5 percent.

"The regulator's minimum capital requirement on the five biggest banks remains at 11.5 percent," said the China Banking Regulatory Commission in statement sent to the media. "From a prudent regulatory management point of view, we have set up different targets, which are all not lower than 11.5 percent."

The comment came after Bloomberg News reported yesterday that the CBRC required Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Bank of Communications to maintain a capital adequacy ratio of at least 11.8 percent in 2011, while Agricultural Bank of China should keep a ratio of 11.7 percent.

The CBRC said the ratios were set at the start of this year and based on the Basel III global regulatory framework.

The five banks, controlling about half of China's banking assets, raised about US$60 billion last year to replenish capital amid a tighter regulatory environment.

ICBC's capital adequacy ratio was 12.27 percent at the end of 2010. Construction Bank's ratio was 12.68 percent. The ratios were 12.58 percent for BOC, 11.59 percent for AgBank and 12.36 percent at BoCom, according to the lenders' annual reports.

Smaller banks with a national presence are required to have at least a 10.5 percent capital adequacy ratio.

Analysts widely expect China to raise capital standards in the coming years in tandem with new global banking requirements.

Liu Mingkang, CBRC's chairman, said on April 19 that banks must keep a close eye on their asset quality. A new round of pressure tests on property loans has been issued this year, with the worst-case scenario of a 50 percent fall in home prices.

Fitch Ratings on April 12 lowered its outlook on China's long-term, local-currency rating to negative, a possible rating downgrade, on worries over bank asset quality.