China’s financial regulators are drafting additional capital requirements on the country’s systemically important banks to curb risks and safeguard the industry, according to a report.
- Banks considered too big to fail will be classified into five categories, and face a surcharge of between 0.25% and 1.5% on top of the mandatory capital adequacy ratios.
- Banks will also be required to report detailed plans on how to recover from a crisis, and draft living wills with disposal plans in case they can no longer operate as an ongoing entity.
- The stricter measures were included in a draft rule released by the People’s Bank of China, and the China Banking and Insurance Regulatory Commission on Friday.
- Global systemically important banks must have liabilities and instruments available to “bail-in” the equivalent to at least 16% of risk-weighted assets by January 1, 2025; and 18% in 2028.
- Authorities started to evaluate systemically important banks this year by measuring the assets of the 30 largest banks. Firms are scored by their interconnectedness with other financial institutions and the complexity of businesses.