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Banks must tighten solvency tests

CHINA'S banking regulator will require commercial banks to conduct quarterly stress tests starting next year to enhance control over liquidity management.

The China Banking Regulatory Commission has ordered the tests to analyze commercial banks' solvency and capability of risk control, according to the China Securities Journal today.

Chinese banks usually carry out stress tests each year at present.

Banks must also improve the stability of their funding sources and reduce reliance on volatile liabilities. They were advised to cut borrowing and lending risks through diversification.

The requirement is among recent actions to tighten oversight of the country's commercial banks.

Liu Mingkang, chairman of the commission, said on Wednesday that Chinese banks must be "reasonable" in their lending and guard against a rise in bad loans.


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