Featured Product

    CBIRC Revises Guidance on Capital Instrument Innovation of Banks

    November 29, 2019

    CBIRC revised guidance on the "Capital Instrument Innovation" of commercial banks, with immediate effect. The revised guidance covers the basic principles for commercial banks to issue capital instruments, the criteria for determining qualified capital instruments, and the working mechanism for commercial banks to issue capital instruments. One of the revisions concerns further clarification regarding the sequence of loss absorption of various capital instruments. The amendments are in line with Basel III and the international practices.

    The former China Banking Regulatory Commission (CBRC) issued, in 2012, the "Measures for the Capital Management of Commercial Banks (for Trial Implementation)" and the "Guiding Opinions on the Innovation of Capital Tools of Commercial Banks" (the former "Guiding Opinions" ) to issue capital for commercial banks in China. Since then, commercial banks have successively introduced new capital instruments such as secondary capital bonds, preferred stocks, and non-fixed-term capital bonds (that is, perpetual bonds). With the increasing variety of capital instruments, the identification criteria for qualified capital instruments specified in the original Guiding Opinions need to be adjusted and refined. Earlier this year, the Ministry of Finance issued supporting rules such as the “Provisions on Perpetual Debt-related Accounting Treatment,” which also laid an important policy foundation for this revision. CBIRC has revised this guidance in response to these changes and also published the questions and answers (Q&A) to help understand the revisions. 

    The amendments to the guidance are to:

    • Adjust capital instruments trigger event name to more accurately reflect the meaning of the triggering event
    • Adjust the other tier 1 capital trigger conditions and set a different trigger events to other tier 1 capital in accordance with the accounting classification
    • Specify the order of loss absorption of capital instruments (All capital instruments of the same level should absorb losses at the same time and capital instruments of different levels should absorb losses in sequence.)
    • Specify that write-downs should be permanent write-downs
    • Clarify the relevant requirements for the issuance of capital instruments by commercial banks, including attracting diversified market participants to participate in investment through market-based pricing and ensuring the orderly connection of issuance and redemption of capital instruments

     

    Related Links

    Keywords: Asia Pacific, China, Banking, Regulatory Capital, Tier 1 Capital, Loss Absorbing Capacity, Basel III, CBIRC

    Featured Experts
    Related Articles
    News

    BCBS Amends Guidelines on Sound Management of AML/CFT Risks

    BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).

    July 02, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS Publishes List of Internationally Active Insurance Groups

    IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.

    July 01, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act

    FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).

    July 01, 2020 WebPage Regulatory News
    News

    EC Launches Consultation on Review of Solvency II Directive

    EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.

    July 01, 2020 WebPage Regulatory News
    News

    ECB Consults on Supervisory Approach to Consolidation in Banking

    ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.

    July 01, 2020 WebPage Regulatory News
    News

    PRA Letter Sets Expectations on Approach to Managing Climate Risks

    PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.

    July 01, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Swap Margin Rule

    US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5425