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March 3, 2010

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Home » Business » Finance

Banks must meet higher CAR

MAJOR Chinese banks have to meet a minimum 11 percent capital adequacy requirement as the government attempts to strike a delicate balance between credit growth and to limit risks, China's banking regulator said.

Mid-sized and smaller banks are required to have a capital adequacy ratio of at least 10 percent this year, Liu Mingkang, chairman of the China Banking Regulatory Commission, said in remarks published yesterday in the Financial News, a central bank publication.

"We can fight against risks only with ample capital and healthy assets quality," said Liu. "That's the key lesson we learn from the global financial crisis. The stricter capital requirement is necessary to hedge against risks."

Previously, the CBRC set the CAR at a minimum of 8 percent for the industry overall and 10 percent for public banks.

The CBRC is tightening requirement on banks' CAR to ensure that a surge in credit in 2009 won't trigger rising sour loans. There have been signs that some funds have gone into the stock and property markets.

Banks in China lent a record 9.59 trillion yuan of new loans in 2009 - nearly double the 5 trillion yuan target. But the credit growth is expected to slow to 7.5 trillion yuan this year as China targets a money supply growth of 17 percent.


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