Banking

China to phase in new bank provisioning rules

(Agencies)
Updated: 2010-11-26 09:54

China will phase in planned changes to its loan-loss provisioning rules to give banks time to adapt, an official newspaper reported on Thursday.

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"Banks of systemic importance must meet the requirement by the end of 2012 while others must achieve it by the end of 2016," the Shanghai Securities News paraphrased a source as saying.

Under the new rules, foreshadowed in local media reports in recent months, lenders will be required to set aside at least 2.5 percent of their loans as a general reserve.

"If the rumor about the 2.5 percent provision rule proves correct, the banks that will be the most affected include China Merchants Bank and Bank of Communications," James Antos, a bank analyst at Mizuho Securities in Hong Kong, said in a note.

Currently, Chinese banks must hold provisions to cover 150 percent of non-performing loans. That ratio at the end of June was 186 percent.