SHANGHAI :China on Friday tightened rules on companies that conduct debt-to-equity businesses for banks, setting capital adequacy requirements for so-called financial asset investment firms.
Such companies"should have ample capital to deal with group, individual and systemic risks", the China Banking and Insurance Regulatory Commission said in a statement. The new rules require a minimum capital adequacy ratio of 8 per cent. The floor of Tier 1 CAR and core Tier 1 CAR are set at 6 per cent and 5 per cent, respectively.
The rules also set requirements on leverage, and urge the companies to set aside counter-cyclical capital during certain circumstances. Regulators issued the notice of the rules to China's Big Four banks and financial asset investment firms.