Wednesday, December 22, 2010

New China Bank Rules Affect Capital

The government is making more moves to protect from expected losses in development loans.

This time banks are expected to (or already have instituted, it actually isn't clear from the article) raise the assigned risk weightings from 50% to 100% for loans covered by cash flows and to 300% for those not.

China’s Risk-Weighting Rule May Cut Banks’ Capital
The government is trying to limit risks stemming from last year’s surge in loans to local-government finance vehicles for roads, bridges and railroads. Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.2 trillion) credit they’ve extended, a person with knowledge of data collected by the industry regulator said in July.

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