CBRC refuses banks below 9pc capital adequacy ratio to expand

The mainland's banking regulator is refusing to allow lenders with a capital adequacy ratio of less than 9 per cent to expand their business.

The move comes as bargaining goes on behind closed doors between banks and the China Banking Regulatory Commission over the tightening of capital requirements.

Several banks that were believed to be thinly capitalised had seen their applications to start new lines of business or open new branches suspended by the regulator, the China Securities Journal quoted Ba Shusong, a vice-director with the Development Research Centre, as saying yesterday.

Ba's think tank reports directly to the State Council.

Of the 14 listed mainland banks, only Shanghai Pudong Development Bank, Shenzhen Development Bank and China Minsheng Bank Corp managed to get their capital adequacy ratio below the 9 per cent benchmark as of June 30, according to their first half financial statements.

Guo Tianyong, a banking professor with the Central University of Finance and Economics, estimated that 20 per cent of all mainland licensed lenders needed to raise capital in one way or another to make the 9 per cent cut-off.

Li Yamin, an analyst with Shenyin Wanguo Securities, said it was natural that the regulator was exercising its powers in the campaign to urge banks to boost their capital base amid a potentially risky credit boom as a result of the country's monetary loosening.