CBIRC published the final measures for the management of the quality of liabilities of commercial banks. The measures, which shall come into force on the date of promulgation, are applicable to the domestic and foreign debt business of commercial banks. The measures specify that commercial banks shall focus on strengthening liability quality management in terms of these six aspects: the stability of the source of liabilities, diversity of liability structure, the reasonableness of matching liabilities and assets, initiative in obtaining liabilities, the appropriateness of the cost of liabilities, and the authenticity of debt items. The measures also specify the reporting, disclosure, event notification, and management information system requirements for commercial banks.
As stated in the CBIRC publication, the term “liability quality management” means that commercial banks aim to ensure the safety, liquidity, and efficiency of their operations, in accordance with the principles of suitability to their business strategies, risk appetites and overall business characteristics in terms of the source and structure of their liabilities. The measures stipulate that commercial banks shall establish a liability quality management system commensurate with the size and complexity of their liabilities. Banks shall also establish a sound debt quality management organizational structure; clarify the responsibilities and reporting lines of the board of directors, senior management, and relevant departments in debt quality management; and establish corresponding assessment and accountability mechanisms. As per the measures, commercial banks shall formulate, implement, and annually evaluate (also revised if needed) the debt quality management strategies, systems, procedures, limits, and emergency plans and establish and improve internal control systems related to debt quality management. When implementing debt quality management, commercial banks shall fully consider the relevance of debt quality management and various other risks, such as liquidity risk.
The measures also stipulate that these banks shall establish a standardized liability quality management reporting system; clarify the content and reporting form; frequency and scope of liability quality management; and ensure that the board of directors, the board of supervisors, senior management, and other management personnel understand the status of liability quality management in a timely manner. Commercial banks should make at least an annual disclosure of liabilities and liability quality management system status information. Commercial banks shall establish a complete and reliable information system to ensure that the information system can monitor the indicators and limits of liability quality and provide effective support for the measurement, monitoring, and control of liability quality management. Commercial banks shall maintain and improve the management information system in a timely manner as needed, and take corresponding measures to ensure the accuracy, timeliness and safety of data. Commercial banks are required to promptly report to CBIRC, or its dispatched office, the major events, as specified in the measures, that may adversely affect the quality of bank liabilities, along with the corresponding measures to be taken to address the reported event.
CBIRC had consulted on these measures from January 22, 2021 to February 22, 2021 and received feedback from financial institutions, experts, scholars, and the general public. Feedback from all parties mainly included the responsibilities of the board of directors and senior management, the scope of application of quantitative indicators, the construction of the liability quality management system, and the content of the annual report. CBIRC has carefully studied relevant opinions and suggestions and has fully absorbed and adopted relevant suggestions.
Related Links (in Chinese)
Effective Date: Promulgation Date
Keywords: Asia Pacific, China, Banking, Asset Liability Management, ALM, Governance, Credit Risk, Reporting, Disclosures, CBIRC
Previous ArticleBoE Policy Committee Deliberates on CCyB Rate and Cyber Stress Tests
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.