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
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