China Banking Regulatory Commission, Administration of Capital Adequacy Ratios of Commercial Banks Procedures

Promulgated: February 23 2004
Effective: March 1 2004
Interpreting authority: China Banking Regulatory Commission (CBRC)
Applicability: The Procedures apply to commercial banks, including Chinese-invested banks, wholly foreign-owned banks and Sino-foreign equity joint venture banks established within the People's Republic of China (Article 2).
  For the purposes of the Procedures, the term "capital adequacy ratio" means the ratio between the capital held by a commercial bank in compliance with the provisions of the Procedures and the risk-weighted assets of the commercial bank (Article 3).
  The Procedures shall, mutatis mutandis, apply to the calculation, supervision, examination and information disclosure of the capital adequacy ratios of wholly foreign-owned finance companies and equity joint venture finance companies (Article 47).

Main contents: The capital adequacy ratio of a commercial bank shall not be lower than 8% and the core capital adequacy ratio shall not be lower than 4% (Article 7). Part Two sets out the detailed calculation method of capital adequacy ratios. The board of directors (or the head of the bank) shall account for the ultimate responsibilities for capital adequacy ratio management (Article 33). Commercial banks shall report to the CBRC their capital adequacy ratios before and after consolidation of their statements. They shall also promptly report special major events that affect the capital adequacy ratio (Article 35). The CBRC shall classify commercial banks into three categories according to their capital adequacy ratios: capital adequate, capital inadequate and capital severely inadequate, and will adopt measures to prevent the capital adequacy ratio from falling to the minimum or to correct the capital inadequacy of the bank (Articles 38 to 41). Part Four requires commercial banks to disclose information on capital adequacy ratios.
Related legislation: PRC Banking Regulation Law, Dec 27 2003, CLP 2004 No.1 p45; PRC Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32; and PRC Administration of Foreign-funded Financial Institutions Regulations, Dec 20 2001, CLP 2002 No.1 p5