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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 (CBIRC) said in a statement.
The new rules require a minimum capital adequacy ratio (CAR) of 8%. The floor of Tier 1 CAR and core Tier 1 CAR are set at 6% and 5%, 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.
Source: Reuters (Reporting by the Beijing Monitoring Desk Editing by Mark Heinrich)
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