PBC-CBIRC Notice on Managing Real Estate Loan Concentration at Banks
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)
- Press Release on Real Estate Loan Concentration
- Notice on Real Estate Loan Concentration
- Q&A on Real Estate Loan Concentration
- Press Release on Rural Bank Reform
- Notice on Rural Bank Reform
Effective Date: January 01, 2021
Keywords: Asia Pacific, China, Banking, Real Estate Loans, Credit Risk, NPLs, Regulatory Capital, PBC, CBIRC
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Previous Article
CFTC Finalizes Margin Rules for Security Futures and Uncleared SwapsRelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.