The China Banking and Insurance Regulatory Commission (CBIRC) and the People’s Bank of China (PBOC) are seeking comments on the draft "Measures for the Capital Management of Commercial Banks” until March 20, 2023. These measures address the requirements for credit risk, market risk, operational risk, and credit valuation adjustment risk under the international Basel framework. These measures are scheduled to be officially implemented as of January 01, 2024.
These measures revise the risk-weighted asset measurement rules under the first pillar, improve and adjust the rules under supervisory pillar 2, and "comprehensively" update the information disclosure standards and content under the third pillar. The measures apply the principle of proportionality to set out banks into three categories and to apply the requirements commensurate with their size:
- Banks with "large or more cross-border business are classified in the first tier" and are required to comply with international rules for benchmark capital supervision.
- Banks with "relatively small asset scale and cross-border business scale" are included in the second tier and required to implement relatively simplified regulatory rules.
- The third tier comprises mainly commercial banks with assets of less than CNY 100 billion that mainly focus on serving counties and small and micro enterprises; the capital requirements for these banks have been further simplified.
Under this draft revised framework, the rules for the first tranche of banks require the disclosure of a full set of statements, including 70 disclosure report templates, with these measures detailing the disclosure format, content, frequency, method and quality control requirements; improving the data granularity requirements for information disclosure; and enhancing the transparency of risk information and market binding. The second tranche of banks have simplified disclosure requirements and are required to disclose eight statements, including risk-weighted assets, capital composition, capital adequacy ratio, and leverage ratio. The third tranche of banks only needs to disclose two statements, including capital adequacy ratio and capital composition.
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Keywords: Asia Pacific, China, Banking, Basel, Reporting, Proportionality, Credit Risk, Market Risk, CVA Risk, Operational Risk, Regulatory Capital, PBC, CBIRC
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