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Regulator may delay capital requirement

(Shanghai Daily)

09:17, December 16, 2011

China's banking regulator may postpone tougher capital adequacy ratio regulation on banks in a bid to ensure credit supply and support economic growth, and analysts view this delay as a signal that the regulator may ease the "over-tight" supervision on lenders.

The new regulations, originally planned to take effect at the beginning of next year, will punish banks which missed the ratio of 11.5 percent for systematically significant banks and 10.5 percent for non-systematically significant lenders.

The ratio measures banks' ability to meet time liabilities and other risks such as credit risk and operational risk. Banks are also required to put aside at least 2.5 percent of their total loans as provision against bad loans.

"With domestic economic growth slowing, the banks need sufficient capital to sustain economic growth and credit supply," the Shanghai Securities News reported yesterday, citing an unidentified official from the China Banking Regulatory Commission.

The regulator said that revisions are still being made on the draft regulations and that there is not yet a time table for implementation.

The draft of the regulation was announced in May, a time when Chinese banks plan to raise funds to replenish their capital base due to last year's lending binge.

Li Feng, an analyst at Minsheng Securities, said on Wednesday that listed banks in China will need to raise a combined 200 billion yuan (US$31.6 billion) to meet the new capital ratio requirement and that all 14 listed banks in China failed to meet the provision requirements in the third quarter of this year.

Analysts said the delay indicates the CBRC will slightly ease its credit regulations and monitoring amid sluggish economic growth.

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