CBRC: Banks need protection
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China needs to strengthen supervision over "too big to fail" banks as slower economic growth is possible next year and there are still uncertainties in the global market, said Liu Mingkang, chairman of the China Banking Regulatory Commission.
"China's banking standards, especially the capital adequacy ratio, are lower than international criteria," the China Securities Journal quoted Liu as saying yesterday. "With economic moderation on the way, tougher measures are needed to fend off risks."
China's gross domestic product growth is estimated to slow to around 9 percent next year after expanding a projected 10.2 percent in 2010. The slowdown is necessary to carry out economic restructuring and tame runaway inflation.
The CBRC is now studying new regulations for financial institutions that are considered "too big to fail," Liu said. The next step is to enhance precautionary measures to prevent financial institutions from employing business structures that are overly complicated.
The average capital adequacy ratio of major Chinese commercial lenders stands at 11.5 percent. This is still below the world's top 50 banks, which had an average ratio of 11.86 percent in 2008 when the global financial crisis hit.
"China's demand for an 11.5 percent capital adequacy ratio is the bottom line, and it's a common view that supervision should be strengthened to guarantee the financial security of big lenders," Liu said.
Meanwhile, banks in China are set to surpass this year's loan target. In the first 11 months of this year, they lent a combined 7.4 trillion yuan (US$1.1 trillion), slightly shy of the 7.5 trillion yuan target for the year.
Authorities are wary of the risk of increased bad loans next year and have already ordered banks to lift provisions.
The ratio of non-performing loans may rise to 2 percent this year after factoring in local government debt and tightening in the real estate sector, according to the commission.
