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May 04, 2018

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.  

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Effective Date: July 01, 2018

Keywords: Asia Pacific, China, Banking, Concentration Risk, Large Exposures, CBIRC

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