China Banking Regulatory Commission, Guidelines on the Monitoring Inspection of the Capital Adequacy Ratio of Commercial Banks

Issued: December 4 2009
Effective: January 1 2010
Interpreting authority: China Banking Regulatory Commission (CBRC)

Applicability: The Guidelines apply to banks subject to Basel II under the Guiding Opinion for Implementing Basel II in the Banking Industry in China and other commercial banks that implement Basel II on a voluntary basis (Article 2).

Main contents: A commercial bank shall establish internally a capital adequacy assessment procedure which covers areas such as governance structure, risk assessment and capital planning, in order to ensure that its capital level is able to effectively cover all types of risks it faces and to satisfy the needs for implementing its business strategy (Article 4). CBRC shall conduct a monitoring inspection of the commercial bank's internal procedure for assessing capital adequacy, and shall make a comprehensive assessment of its capability of capital planning and for meeting the minimum regulatory capital requirements (Article 6). CBRC shall independently assess all types of major risks faced by the commercial bank and its risk management capability, and shall have the authority to determine the regulatory capital requirements for the commercial bank based on CBRC's assessment of its internal procedure for assessing capital adequacy and its risk status, while taking into account factors such as stress test results and the economic cycle (Article 7). CBRC shall have the authority to adopt intervention or rectification measures on any commercial bank that is unable to fully cover its capital risks, and to urge such bank to raise its level of capital adequacy (Article 8).