Major banks face a capital ratio of 11.5%

CHINA'S banking regulator required the nation's systematically important banks to have a minimum capital adequacy ratio of 11.5 percent by the end of 2013 in its own version of the Basel agreement.

The ratio for non-systematically important banks is set at 10.5 percent under "normal conditions," and the lenders should fulfill the requirement by the end of 2016, the China Banking Regulatory Commission said in a statement on its website yesterday. When loan growth is considered "excessive," the CBRC said it will raise the capital ratios for all banks by as much as 2.5 percentage points.

China is tightening oversight of banks, limiting mortgages and raising interest rates to prevent a record US$2.7 trillion of credit extended in the past two years from inflating asset bubbles that may saddle lenders with bad loans.

The central bank last month raised the amount of deposits lenders must set aside to the highest in at least two decades, while the CBRC ordered a new round of stress tests on property loans.

Under the new regulations, banks need to have minimum core Tier-1 capital, which excludes perpetual preferred stock, of at least 5 percent, while their Tier-1 capital is set at 6 percent.

All banks will be required to have a capital adequacy ratio of at least 8 percent, with an extra 2.5 percentage points as surplus capital buffer during normal credit conditions. Systemically important banks need to maintain an additional percentage point.

The CBRC also requires banks to have loan-loss provision account for at least 2.5 percent of their total advances from 2012.

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