China plans to adopt more differentiated risk weighting measures to limit banks’ lending to toxic investments that are exposed to higher default threats, including those to problematic house developers.
(Bloomberg) — China plans to adopt more differentiated risk weighting measures to limit banks’ lending to toxic investments that are exposed to higher default threats, including those to problematic house developers.
The China Banking and Insurance Regulatory Commission proposed to align its banking prudential regulations to global standards in a draft amendment released on Saturday, and said it would classify all its commercial lenders into three groups to direct loans into the real economy.
The new rule, due to take effect from Jan. 1 next year, is aimed at providing “ample and stable” liquidity to the Chinese banking system, it said. The groups will practice different rules related to risk-weight settings, capital requirements and information disclosures over their lending both at home and abroad.
The regulator also plans to set more specific risk control measures on house mortgage lending, taking into account factors such as property type, revenue streams and loan-to-value ratio.
China is under pressure to propel its economic recovery and rescuing its housing market from a slump. The banking regulator said the rule could help to streamline loan approvals to small business too.
The draft rules also set out capital requirements for commercial banks’ investments in asset management products for the first time. Such holdings will be assigned a 1,250% risk weighting unless weightings of underlying assets can be calculated.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.