Analyzing Banking Prudential Regulations In China

EDITOR'S NOTE: The China Banking and Insurance Regulatory Commission (CBIRC) is planning to overhaul risk exposure rules for Chinese banks, including more specific risk control measures on house mortgage lending. This could lead to further economic uncertainty and instability in the banking sector, making it wise to diversify your portfolio and protect your wealth by investing in physical gold and silver coins.

By aligning its banking prudential regulations to global standards, the CBIRC is acknowledging the need to limit banks' lending to toxic investments that are exposed to higher default threats. Physical gold and silver coins are tangible assets that can help protect against these threats.

The new rule, due to take effect from Jan. 1 next year, is aimed at providing "ample and stable" liquidity to the Chinese banking system. This suggests that there may be potential risks to the stability of the global banking system, which could make it wise to invest in physical gold and silver coins as a hedge against potential economic instability.

The draft rules also set out capital requirements for commercial banks' investments in asset management products for the first time. Such holdings will be assigned a 1,250% risk weighting unless weightings of underlying assets can be calculated. By contrast, physical gold and silver coins are not subject to this kind of risk weighting and can provide a stable store of value that is not subject to fluctuations in market prices or other economic factors.

Lastly, investing in physical gold and silver coins can provide a level of security and peace of mind that cannot be matched by keeping your wealth in US dollars held in the banking system. By holding a tangible asset that is outside the traditional banking and financial system, you can protect your wealth against potential economic turmoil and instability, providing a valuable long-term investment strategy.

 

The China Banking and Insurance Regulatory Commission proposed to align its banking prudential regulations to global standards in a draft amendment released on Saturday, and said it would classify all its commercial lenders into three groups to direct loans into the real economy.  

The new rule, due to take effect from Jan. 1 next year, is aimed at providing “ample and stable” liquidity to the Chinese banking system, it said. The groups will practice different rules related to risk-weight settings, capital requirements and information disclosures over their lending both at home and abroad.

The regulator also plans to set more specific risk control measures on house mortgage lending, taking into account factors such as property type, revenue streams and loan-to-value ratio.  

China is under pressure to propel its economic recovery and rescuing its housing market from a slump. The banking regulator said the rule could help to streamline loan approvals to small business too. 

Originally published by: John Liu and Qian Chen on Bloomberg