The China Banking Regulatory Commission (CBRC) has issued a fresh warning to domestic banks to comply with capital adequacy requirements or face possible sanctions, the Wall Street Journal reported. The announcement followed a warning by the OECD that China must slow credit growth to avoid asset bubbles in real estate and equities. New loans in the first half of the year totaled US$1.08 trillion, equivalent to half of the country’s gross domestic product over the period. The CBRC has already created a sanctions regime for banks that overextend their lending, but the sanctions have rarely been enforced. The announcement could signify Beijing’s increasing concern about the potential effect of non-performing loans (NPLs) on sustained economic growth. The capital adequacy requirement was raised from 8% to 10% at the end of 2008, and banks were ordered to set aside credit provisions equivalent to 150% of NPLs. The CBRC also reduced the amount of subordinated bonds that banks can apply toward their capital requirements. China Construction Bank said the CBRC is considering imposing yet stricter capital requirements next year.