CBRC relaxes liquidity rules

The China Banking Regulatory Commission said in an online statement on Friday that it is proposing to ease requirements on lenders' liquidity levels to reflect new changes in the Basel III guidelines.

The CBRC said it will extend the deadline for banks to meet the required minimum liquidity coverage ratio, or LCR, which was to have taken effect this year, until 2018.

The LCR - the proportion of a bank's highly liquid assets against its total net cash outflows in the subsequent 30 days - is a regulatory gauge that reflects a bank's short-term resilience under high-stress scenarios.

It's a part of a series of reforms introduced under Basel III for a more stable and sound banking system.

"Banks must keep their LCR at a level of no lower than 100 percent as of the end of 2018," the statement said.

Lenders can meet the requirement in line with the Basel III guidelines on banking capital levels in a transitional period between 2014 and 2017, the statement said.

Under the draft regulations, the CBRC will allow banks to maintain lower LCR ratios under some extreme scenarios to cushion against a possible negative impact on the entire financial system.

Market insiders said they aren't surprised by the move, as China's banking system needs time to mature, and Chinese banks already have a stronger capital base than many Western lenders.

"The plan may have a limited impact on the liquidity level of China's banks in the short term. In the long run, it may add to banks' costs and squeeze lenders' asset profit margins," said Shanghai-based analyst Wu Yinzhou of Fulun Consultancy.

The CBRC also said the loan-to-deposit ratio requirements for banks will be one of the measures to gauge banks' liquidity. It said it will improve the requirements, though it didn't elaborate.

In a separate statement by the CBRC on Friday, the regulator said China's capital rules are "compliant" with the minimum standards outlined in the Basel III framework.