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Chinese regulator revises liquidity risk management rules for banks

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Chinese regulator revises liquidity risk management rules for banks

The China Banking and Insurance Regulatory Commission revised liquidity risk management rules for commercial banks, effective July 1, introducing three quantitative indicators to help them better guard against liquidity risks.

In a May 25 statement, the CBIRC said it will use the net stable funding ratio, or NSFR, for banks with assets of no less than 200 billion yuan to measure the extent to which the banks' long-term stable funds could support business development.

For banks with assets of less than 200 billion yuan, the regulator will use the high-quality liquid asset adequacy ratio, or HQLAAR, to measure if a bank's high-quality liquid asset adequacy ratio could cover short-term liquidity gaps when under pressure.

In addition, the CBIRC will apply liquidity matching ratio, or LMR, to examine commercial banks' assets and liabilities are matched in maturity.

In addition, the regulator said it revised calculation measures for some other indicators to emphasize risk management and supervision and detailed liquidity risk management requirements such as on financing management.

The NSFR requirements will take effect along with the new rules from July 1. Further, the CBIRC asked small and midsize lenders to archive 80% for its HQLAAR by end-2018 and 100% by end of June 2019.

The regulator added that it will implement requirements for liquidity matching ratio from 2020.

As of May 25, US$1 was equivalent to 6.39 Chinese yuan.