Featured Product

    CBIRC Consults on Measures for Classification of Asset Risks of Banks

    April 30, 2019

    CBIRC launched a consultation on the draft interim measures for the classification of financial asset risks of commercial banks in China. The comment period for this consultation ends on May 31, 2019. The Interim Measures extend the risk classification from loans to all financial assets that bear credit risk and propose non-credit assets with credit impairment as the core classification requirement, especially for the classification of asset management products.

    Compared with the current "Guidelines" on asset risk classification, the "Interim Measures" expand the scope of asset risk classification, propose a new core definition of risk classification, emphasize the debtor-centered classification concept, clearly define the number of overdue days as an objective indicator of risk classification, and provide risk classification requirements for restructuring assets. Additionally, the "Interim Measures" put forward systematic requirements for commercial banks to strengthen risk classification management and clarify the relevant requirements for supervision and management. 

    As per the new measures, commercial banks are required to improve the risk classification governance structure, formulate risk classification management systems, clarify classification methods, processes and frequencies, develop and improve information systems, and strengthen monitoring and analysis, information disclosure, and document managementAfter the implementation of the Interim Measures, claims overdue for more than 90 days, even if the mortgage guarantee is sufficient, should be classified as bad. Considering the severity of the risks reflected by the non-retail debtor overdue for more than 90 days, the bank should categorize its debt as bad if the debtor’s debt overdue for more than 90 days in all banks’ debts has exceeded 5%. In addition, if loans are overdue for more than 270 days, they should be classified as at least suspicious. If overdue for more than 360 days, they should be classified as loss. 

    As per the CBIRC notification, credit risk is the most important risk faced by the banking industry in China and a sound risk classification system is the prerequisite for effective prevention and control of credit risk. These measures replace the existing guidelines on this topic while drawing on the latest international requirements and keeping in mind the domestic regulatory practices. These measures are also cognizant of the BCBS guidelines, from 2017, for careful handling of assets (Definitions of Adverse Exposure and Regulatory Tolerance); these BCBS guidelines clarified the criteria and classification requirements for non-performing assets and restructured assets to enhance the consistency of the global banking asset risk classification criteria.

     

    Related Links (in Chinese)

    Comment Due Date: May 31, 2019

    Keywords: Asia Pacific, China, Banking, Credit Risk, NPLs, Interim Measures, Classification of Impairments, 90 Days Overdue, Asset Risk Classification, CBIRC

    Related Articles
    News

    BIS Examines Use of Big Data and Machine Learning at Central Banks

    BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.

    March 04, 2021 WebPage Regulatory News
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ECB Publishes Guide for Determining Penalties for Regulatory Breaches

    ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.

    March 02, 2021 WebPage Regulatory News
    News

    MAS Sets Out Good Practices to Manage Operational Risks Amid COVID

    MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.

    March 02, 2021 WebPage Regulatory News
    News

    ACPR Announces New Data Collection Application for Banks and Insurers

    ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.

    March 02, 2021 WebPage Regulatory News
    News

    BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox

    BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.

    March 02, 2021 WebPage Regulatory News
    News

    EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models

    EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.

    March 01, 2021 WebPage Regulatory News
    News

    SRB Publishes Overview of Resolution Tools Available in Banking Union

    SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.

    March 01, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6655