China’s top financial regulator issued revised final rules Wednesday on commercial banks’ capital management after gathering public feedback on a draft version published in February, lowering the capital required to be set aside for banks with heavy exposure to mortgages, reports Caixin. The rules, which take effect Jan. 1, aim to help banks improve risk management and better serve the economy.
Compared with the draft version, the final rules cut the risk weightings assigned to mortgage loans at first-tier banks with assets of more than RMB 500 billion ($68 billion) by 10% to 30% depending on the size of the loans, according to the National Administration of Financial Regulation (NAFR).
Banks’ risk-weighted assets are used to set the minimum amount of capital that they must set aside to ensure capital adequacy ratios. Lower risk weightings for mortgage loans mean banks can set aside less capital to meet the requirements. Banks with heavy exposure to mortgages will largely benefit from the new rules, analysts at ZheShang Securities said.