CBIRC and PBC issued a notice establishing the mechanism for countercyclical capital buffer (CCyB), which came into force as of September 30, 2020. The notice specifies the provision methods, coverage, and evaluation mechanism of CCyB in China, by referring to international practices as well as the relevant requirements put forward by BCBS. In line with the current systemic financial risk assessments and pandemic containment needs, the ratio for CCyB shall be initially set at zero and banking financial institutions shall be free from the extra capital management requirements.
CBIRC and PBC will take into consideration factors such as macroeconomic and financial conditions, the level of leverage ratio, and soundness of the banking sector in a comprehensive manner. The requirements for CCyB will be re-evaluated and adjusted on a regular basis to forestall systemic financial risks. The establishment of the mechanism for CCyB serves as a significant move to improve the macro-prudential policy framework and enrich the macro-prudential policy toolkit. It is conducive to further promoting the sound operation of banking financial institutions, enhancing countercyclical adjustments of macro-prudential policies, and cushioning the negative effects of procyclical fluctuations and unexpected shocks of financial risks, with the aim to safeguard the stable operation of the financial system in China.
Related Link (in Chinese): Press Release
Effective Date: September 30, 2020
Keywords: Asia Pacific, China, Banking, CCyB, Basel, Regulatory Capital, Systemic Risk, Macro-Prudential Policy, PBC, CBIRC
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