China Said to Plan Rules Tightening Capital of Banks

From Bloomberg:

China plans to tighten capital requirements for banks, threatening to curb the record that’s fueled a 60 percent rally in the nation’s , three people familiar with the matter said.

The sent draft rule changes to banks on Aug. 19 requiring them to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, said the people, who have seen the document. Banks have until Aug. 25 to give feedback, said the people, declining to be named as the matter is private.

As a result, banks may need to rein in lending or sell shares to lift capital adequacy ratios to the 12 percent minimum. Chinese stocks briefly entered a so-called bear market this week on concern the government would stymie new that exceeded $1 trillion in the first half. A department official at the regulator declined to comment by phone and didn’t immediately respond to a faxed inquiry.

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