Publication - Systemically important banks: Basel Committee publishes implementation assessments on frameworks - Assessment of Basel III G-SIB framework and review of D-SIB frameworks – China
Executive summary
The Basel Committee on Banking Supervision (Basel Committee) sets a high priority on the implementation of regulatory standards underpinning the Basel III framework. The Committee established the Regulatory Consistency Assessment Programme (RCAP) to monitor, assess and evaluate its members’ implementation of the Basel framework.
This report summarises the findings of the RCAP Assessment Team on the domestic adoption of the Basel global systemically important bank (G-SIB) framework in China. The focus of the assessment was on the consistency and completeness of the regulations in China with the Basel Committee’s minimum requirements. An evaluation of the overall soundness and stability of the banking sector in China, the capital levels of individual banks and the supervisory effectiveness of the Chinese authorities was not in the scope of this assessment. The RCAP Assessment Team was led by Mr Wayne Byres, Chairman of the Australian Prudential Regulation Authority.
The Assessment Team comprised four experts drawn from the Basel Committee Secretariat, Brazil, India and Singapore. The main counterpart for the assessment in China was the China Banking Regulatory Commission (CBRC). The assessment of the Chinese G-SIB frameworks was conducted alongside assessments and reviews in the other four jurisdictions that are currently home to G-SIBs: the European Union, Japan, Switzerland and the United States.1 The regulations implementing the Chinese G-SIB framework were issued in June 2012, through the CBRC’s Capital Rules for Commercial Banks (provisional), and in January 2014, through the CBRC’s Guidelines on the Disclosure of the G-SIB Assessment Indicators for Commercial Banks. There are currently four G-SIBs based in China: Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China Limited.2
The G-SIB framework in China is assessed as compliant with the Basel G-SIB framework. This is the highest overall grade. The two subcomponents of the G-SIB framework, higher loss absorbency and disclosure requirements, are assessed as largely compliant and compliant respectively. Some aspects of the G-SIB framework in China are more conservative than the Basel framework. These include higher minimum capital requirements and stricter capital conservation standards. These aspects are listed in Annex 5 but have not been taken into account for the final assessment of compliance, as per the agreed assessment methodology.
The assessment identified one issue, on the use of non-euro-based thresholds for disclosure and reporting, where further clarification from the Basel Committee is sought. Alongside the G-SIB assessment, the Assessment Team conducted a review of the domestic systemically important bank (D-SIB) framework in China, the European Union, Japan, Switzerland and the United States. Unlike the G-SIB assessment, this review was not graded, consistent with the high-level, principles-based nature of the Committee’s D-SIB framework. As of 1 April 2016, China had not implemented a D-SIB framework. The CBRC is collaborating with the People’s Bank of China on formulating guidance on the D-SIB assessment and capital surcharge.
The RCAP Assessment Team acknowledges the professional cooperation received from the CBRC during the assessment and review. The Assessment Team is hopeful that the RCAP exercise will contribute to the sound initiatives that have been undertaken in China and to strengthening further the prudential effectiveness and full implementation of these G-SIB and D-SIB frameworks.
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