CBIRC Caps Risk Exposure of Chinese Banks to Single Clients

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The China Banking and Insurance Regulatory Commission (CBIRC) hopes to contain risk within the financial system with the introduction of a new ceiling on the amount that banks are permitted to lend to a single client.

CBIRC has just issued the “Commercial Bank Large-sum Risk Exposure Administrative Measures” (商业银行大额风险暴露管理办法) with the goal of strengthening management of large-sum risk exposure as well as effectively preventing and controlling the concentration of risk within the Chinese banking sector.

The Measures limit the amount that banks can lend to a single non-bank client to no more than 10% of net capital, or 15% of tier-1 net capital, as well as limit risk exposure to a single banking sector client or group client to no more than 25% of tier-1 net capital.

The Measures are scheduled to come into effect on 1 July 2018.

According to Xinhua the new Measures will comprise a key component of China’s macro-prudential framework, taking their cue from recommendations made back in 2014 by the Basel Committee on Banking Supervision with regard to unified regulatory requirements for commercial bank risk exposure.

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