China’s Banking Regulator Set to Dial Down Provision Coverage Ratio

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The China Banking Regulatory Commission plans to reduce its provision coverage ratio requirements according to sources speaking to Shanghai Securities News.

Shanghai Securities News reports CBRC is about to issue the “Notification Concerning Adjustments to Commercial Bank Loan Loss Provision Regulatory Requirements” (关于调整商业银行贷款损失准备监管要求的通知), which will stipulate a reduction in the provision coverage ratio (the ratio of provisions to non-performing loans) to 120% – 150% from 150%.

Sources said that the Notification will also reduce the required ratio of provisions to total loan to 1.5% – 2.5% from 2.5%.

Reasons cited for the reduction in the provision coverage ratio  include “effectively servicing supply-side structural reforms, expediting the ability of commercial banks to dispose of non-performing loans, accurately reflecting asset quality and providing more credit resources to raise the ability to service the real economy.”

According to sources China’s banking regulatory authorities will implement adjustments to the ratio requirements within the range outlined by the Notification on a case by case basis for each individual bank.

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