Striving for banking system stability
New measures from China’s banking regulator aim to prevent financial institutions from becoming over-leveraged, and they provide a clear framework on accountability and detailed guidance rules on disclosure
Issue: September 2011
Keywords (click to search):
commercial bank
leverage ratio
CBRC
Global Law Office
The China Banking Regulatory Commission (CBRC) issued the Measures for the Administration of the Leverage Ratio of Commercial Banks (中国银行业监督管理委员会商业银行杠杆率管理办法) (the Measures) on June 1 2011, which will go into effect from January 1 2012. The Measures will become a major regulatory tool for supervising commercial banks and other non-bank financial institutions under the jurisdiction of the CBRC. It is drafted largely on the basis of the relevant part of Basel III and follows the internationally-recognised approach to addressing the issue of over-leverage, which was highlighted during the 2008 financial crisis. Therefore, the Measures are a transplantation of international regulatory norms into the PRC regime, with necessary adjustments to suit the PRC market and market participants’ needs.
There are a few salient features of the Measures that are worth analysing in further detail:
First, the Measures provide a clear framework of accountability. The board of directors has the ultimate responsibility...
Please login or register below to read this article.