CBIRC published a notice on its decision to exempt foreign-funded corporate banks from the regulatory requirements for large-scale risk exposure of parent bank groups. CBIRC made this decision to integrate the current regulatory rules with international standards. The notice also mentions that CBIRC shall strengthen the monitoring of relevant data, make reasonable judgments based on the type of exposure and actual risk of transactions between foreign corporate banks and parent banking groups, and, if necessary, take supervisory measures as required. CBIRC issued the notice to further clarify the relevant regulatory requirements for large risk exposures of foreign banks to the parent bank group within the purview of the implementation of the measures for administration of large risk exposure of commercial banks, which were published by CBIRC in 2018.
CBIRC provides the following clarifications:
- The risk exposure of foreign-funded legal person banks to single inter-bank customers or group customers within the parent bank group is not subject to the regulatory requirements for large risk exposures stipulated in the measures for administration of large exposures.
- All banking and insurance regulatory bureaus shall supervise and urge foreign-funded corporate banks to effectively implement the main responsibilities of risk prevention and control and continue to do a good job in the corresponding risk management of the parent bank group's large risk exposure and the filling of related statements.
- The banking and insurance regulatory bureaus shall strengthen relevant data monitoring, make reasonable judgments based on the types of exposures and actual risk situations of transactions between foreign-funded legal person banks and parent bank groups, and promptly alert banks about abnormal changes or weak risk management capabilities. When necessary, supervisory measures such as conducting prudential discussions and issuing supervisory opinions can be adopted.
- All banking and insurance regulatory bureaus shall strengthen the supervision of related-party transactions, in accordance with relevant regulations, and strictly control the risks of unfair transactions and benefit transmission that may exist in transactions between foreign-funded legal person banks and parent bank groups.
- All banking and insurance regulatory bureaus shall continue to pay attention to the operation and management of the parent bank group of foreign-funded legal person banks, comprehensively consider the changes in the parent bank group's risk, and conduct a dynamic assessment of the risk isolation between the subsidiary bank in China and the parent bank group to prevent cross-border risk contagion.
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Keywords: Asia Pacific, China, Banking, Large Exposures, Foreign Banks, Basel, CBIRC
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