China regulator launches rules on limiting bank exposure
China’s banking watchdog on Friday issued new rules on commercial banks to curb the size of large exposures concerning their capital.
A large exposure is defined as the sum of all exposures of a bank to a counterparty or to a group of connected counterparties, which is equal to or exceeds 10 percent of the bank's eligible capital.
The move marks the regulator's latest efforts to rein in bank leverage ratios and mitigate systemic risk.
The draft rules read that commercial banks’ exposure to the interbank clients cannot exceed 25 percent of their tier-1 capital, while their exposure to the non-interbank associated clients and independent clients cannot exceed 20 percent and 15 percent of their tier-1 capital respectively, according to a statement released by the China Banking Regulatory Commission.
Meanwhile, a three-year grace period is granted to commercial banks to meet the interbank market exposure requirements.