CBIRC Finalizes Measures for Managing Large Exposures of Banks
CBIRC issued rules for the management of large-scale exposures of commercial banks, with July 01, 2018 as the effective date. The rules are intended to prevent and control concentration risk in the Chinese banking sector. These rules are in line with the supervisory framework for measuring and controlling large exposures, which the BCBS issued in April 2014.
The large-scale exposures framework includes chapters on general provisions, regulatory requirements for large exposures, calculation of risk exposures, management of large exposures, supervision and administration, and by-laws. The appendices cover customer identification method, specific risk exposure calculation method, trading account risk exposure calculation method, off-balance-sheet project credit conversion coefficient, qualified material and qualified guarantee range, and phased transitional compliance requirements. The measures stipulate the scope and methods for the calculation of risk exposure and set requirements for commercial banks to strengthen “large-scale risk management” in terms of organizational structure, management systems, internal limits, and information systems for business.
The rules stipulate that exposure of a commercial bank to a single customer in the same industry or a group customer shall not exceed 25% of the net value of tier 1 capital. The risk exposure of a global systemically important bank to another global systemically important bank may not exceed 15% of the net tier 1 capital. The liquidation risk exposure of commercial banks to a single qualified central counterparty is not subject to the large-scale risk exposure supervision requirements stipulated in the present rules and the non-liquidation risk exposure may not exceed 25% of the net value of tier 1 capital. Moreover, the risk exposure and non-liquidation exposure of a commercial bank to a single unqualified central counterparty shall not exceed 25% of the net value of tier 1 capital.
Related Links
- Notice (in Chinese)
- Q&A on Regulation (in Chinese)
- Regulation (in Chinese)
- BCBS Framework, April 2014
Effective Date: July 01, 2018
Keywords: Asia Pacific, China, Banking, Concentration Risk, Large Exposures, CBIRC
Previous Article
BCBS Consults on Revisions to Capital Requirements for Market RiskRelated Articles
HM Treasury Publishes Policy Statement Amending Benchmarks Regulation
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies Finalize Rule to Reduce Impact of Large Bank Failures
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies Finalize Rule on Net Stable Funding Ratio Requirements
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.
FSB Sets Out Effective Practices for Cyber Incident Recovery
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
ECB Publishes Eleventh Issue of the Macroprudential Bulletin
ECB published eleventh issue of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy.
HM Treasury Seeks Views on Review of Solvency II Regime for Insurers
HM Treasury issued a call for evidence seeking views to reform the prudential regulatory regime—also known as Solvency II—of the insurance sector in UK.
ESRB Responds to EC Consultation on Review of Solvency II
ESRB responded to the EC consultation on review of Solvency II regime.
HM Treasury Consults on Phase II of Future Regulatory Framework Review
HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021.
EC Publishes Work Program for 2021
EC adopted the work program for 2021.
