China denies raising banks’ capital ratios

CHINA’S bank regulator yesterday denied that it told the country’s five biggest banks to raise the amount of capital they hold relative to risky loans and assets.

The China Banking Regulatory Commission issued the denial after Bloomberg reported that the Industrial and Commercial Bank of China and three of its rivals were told to raise their ratio of capital to risky assets to at least 11.8 per cent, from the previous ratio of 11.5 per cent.

“The banking regulator requires the five largest banks to keep a minimum capital adequacy ratio of 11.5 per cent, and there’s no change (to the rule),” it said in a statement.

The denial comes amid a series of increases to banks’ capital adequacy ratios by Chinese regulators in response to rising house prices and inflation and a boom in loans and credit. Authorities are keen to limit banks’ systemic risk and curb further large increases in their loan books.

Bloomberg cited three unnamed sources that said ICBC, China Construction Bank, Bank of China and Bank of Communications were told to hold the higher level of capital while a fifth bank, Agricultural Bank of China, was instructed to raise its reserve ratio to 11.7 per cent.