Featured Product

    PBC-CBIRC Notice on Managing Real Estate Loan Concentration at Banks

    January 05, 2021

    CBIRC issued a notice on the reform and reorganization of rural banks while PBC and CBIRC issued a joint notice, along with questions and answers (Q&A), on the establishment of real estate loan concentration management system for banking institutions. The system is designed to advance the supply-side structural reform of the financial sector, enhance the internal controls of banking institutions, optimize the credit structure, and support financing in areas key to economic and social development. PBC and CBIRC will take measures such as additional capital requirements and adjustment of risk-weights of real estate assets for banking financial institutions that have not implemented the requirements of this notice. The notice on management of real estate loan concentration is being implemented from January 01, 2021.

    Based on certain factors, including the asset size and institution type of banking entities, PBC and CBIRC formulated differentiated real estate loan concentration management requirements. The requirements are laid out with a comprehensive consideration of the bank type and the status quo and future space of outstanding real estate loan businesses. To reflect regional differences, appropriate flexibility is allowed in setting forth the real estate loan concentration management requirements for locally incorporated banking institutions. A transition period is arranged in the management system to ensure the smooth implementation of relevant policies and promote the steady and sound development of the real estate market and the financial market. The management requirements are set and applied at the corporate level (excluding overseas branches) and no separate requirements will be imposed on the branches of nationwide banks in different localities.

    Banking institutions that exceed the caps specified in the management requirements should develop a scheme for business adjustments according to their actual conditions during the transition period. Banking institutions that satisfy the management requirements should carry out real estate loan-related businesses in a prudent manner. To extend vigorous support to the rental housing market, rental housing loans will not be included in the calculation of real estate loans as a percentage of total loans for the time being. At present, PBC is working with relevant authorities to study and formulate guidelines for rental housing finance and establish a statistical system for the purpose. When the guidelines and the system are put in place, rental housing loans that meet the definition provided by the authorities will not be included in loan concentration management statistics.

    In recent years, due to various factors, a small number of rural banks have gradually become high-risk institutions, seriously affecting and restricting their sustainable development and financial service capabilities. The CBIRC notice on promoting reform and reorganization of rural banks proposes to support the main originating bank. The support is intended to supplement capital and assist in the disposal of non-performing loans, promote the reform and reorganization of rural banks in an appropriate and orderly manner, support the introduction of qualified strategic investors to assist in acquisition and capital increase, and strengthen the incentive and restraint of the main originating bank. For high-risk rural banks that are slow to deal with their issues, inadequate in advancement, and fail to complete the set goals, the territorial bureau shall, in conjunction with the consolidation bureau, take measures including, but not limited to, supervisory interviews, completion of disposal within a time limit, suspension of new business operations, restrictions on dividends, and orders to adjust senior management. This notice applies to institutions with supervisory rating grade 5 and grade 6 and those rural banks that are identified by the regulatory authorities as seriously risky.


    Related Links (in Chinese and English)

    Effective Date: January 01, 2021

    Keywords: Asia Pacific, China, Banking, Real Estate Loans, Credit Risk, NPLs, Regulatory Capital, PBC, CBIRC

    Featured Experts
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582