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China is planning to tighten capital requirement rules for banks as record lending caused concerns of a rise in bad loans, reports said Friday citing sources.
The China Banking Regulatory Commission sent draft rule changes to banks, in which the watchdog asked banks to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, Bloomberg reported.
This would force banks to either reduce lending or to sell shares to raise cash reserves to meet the 12% capital requirement mandated by the regulator.
According to other reports, there is no mention about when the new rules will come into force.
The move suggests that Chinese authorities are strengthening bank lending supervision in order to make its banking system immune from further shocks.
However, China has pledged to keep appropriately loose monetary policy. Reaffirming its monetary stance, the People's Bank of China said in August that it would take steps to maintain appropriate lending growth.
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