Greater bank disclosure required in 2011

13:11, December 18, 2009      

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China's banking regulator said Thursday it would move to promote transparency in the country's banks through new financial disclosure requirements set to be enacted in 2011.

Commercial banks will have to publicize their capital adequacy ratio and core asset amount quarterly, while their bad debt, risk exposure and equity investment quantity are to be disclosed semi-annually, according to guidelines released Thursday by the China Banking Regulatory Commission (CBRC).

The CBRC said in a separate statement that the new guidelines are to enhance risk disclosure in the banking industry and promote financial prudence among institutions.

The CBRC made the move to meet the requirements of the Basel II banking regulatory standard, a globally-accepted guideline with an execution deadline of December 31 2010, said Luo Yuding, a professor at Shanghai University of Economics and Finance.

By the end of September, Chinese banks' capital adequacy ratio averaged 11.4 percent, according to the CBRC, higher than the bottom line figure of 8 percent set in the Basel II standard.

The CBRC would up the minimum capital adequacy ratio requirement from 8 percent to 10 percent for small- and medium-sized banks, and 11 percent for large banks, CBRC chairman Wang Zhaoxing wrote in an article earlier this month in China Finance magazine.

Zhu Xiaodong, a Beijing-based banking analyst, said the new guidelines make it seem as if the CBRC is worried about bad debt that could result from the huge amount of loans given this year.

The country's banks issued news loans of 9.21 trillion yuan ($1.35 trillion) in the first 11 months of the year, 5.06 trillion yuan ($741.1 billion) more than the same period last year.

Loans next year are expected to reach 7.5 trillion yuan ($1.1 trillion), the National Business News reported.

Zhu also warned of the risk of issuing subordinate bonds to raise funds.

"Banks are buying each others' sub-bonds, so raising the capital adequacy ratio by this means is meaningless, and cannot reduce any risk," Zhu said.

As of early December, 19 of China's banks had sold sub-bonds worth 282.5 billion yuan ($41.37 billion), nearly four-fold the amount sold in 2008, according to Shanghai-based Gildata.

Source: Global Times
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