CBIRC Targets Chinese Bank Liquidity Risk with Trio of New Indicators


The China Banking and Insurance Regulatory Commission (CBIRC) unveiled a trio of new financial indicators on Friday that it hopes will help to shore up the liquidity of domestic lenders.

According to CBIRC the new indicators will “help commercial banks improve capability in guarding against liquidity risks, serve the real economy, and maintain safe, stable operation of the banking system.”

The three new indicators include:

i) The net stable funding ratio, which serves as a measure of a bank’s long-term stable funding towards business development;

ii) The high-quality liquid assets adequacy ratio, which measures whether banks possess sufficient high-quality liquid assets to cover their short-term liquidity needs under stressful conditions;

iii) The liquidity matching ratio, which measures the maturity matching of bank assets and liabilities.

While the liquidity matching ratio will be applicable to all banks, the net stable funding ratio will only be applicable to banks with assets of 200 billion yuan or more, and the high-quality liquid assets adequacy ratio will be applicable to lenders with assets beneath 200 billion yuan.

CBIRC said that new rules governing the three indictors will come into effect on 1 July, with the regulator requiring that they eventually all reach at least 100%.

A grace period will apply to the indicator requirements, however, with the high-quality liquid assets adequacy ratio to reach 80% by the end of the year, and 100% by the end of June 2019.

Implementation of the liquidity matching ratio will commence at the start of 2020.