The China Banking Regulatory Commission is issuing guidelines effective from next month that slow down or even prevent banks from making new loans, in efforts to curb the excessive growth in consumer credit.
The move comes against fears of creating a platform of bad debt. The new guidelines being drafted tighten capital requirements following a record amount of loans extended by mainland banks in the first half of this year. The ruling affects the mutual holdings of banks subordinated bonds, which will now be discounted in the capital adequacy ratio calculation. Lenders are expected to meet an 8 percent capital adequacy ratio, with talk also extending this possibly to 12 percent if the situation does not improve.