China's banks will have to increase their liquidity coverage ratio (LCR) to 100 percent by 2018 under new rules to take effect from March 1, the banking regulator said on Wednesday, reiterating a plan to phase in changes in capital adequacy.
The banking regulator had laid out a timeline in October giving banks more time to prepare for tougher capital adequacy requirements being implemented as part of global rules.
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Chinese banks have been struggling to cope with sporadic cash crashes since mid-2013 as short-term interbank rates jump amid signs the authorities are trying to reduce high local government debt levels and risky shadow banking activity.
The China Banking Regulatory Commission (CBRC) also reaffirmed its requirement that commercial banks' loan-to-deposit ratio cannot be higher than 75 percent.
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The LCR is a regulatory barometer to help gauge banks' short-term resilience to high-stress scenarios, and is part of the set of reforms introduced by Basel III to help deliver a more stable and healthy banking system. It measures the highly liquid assets held by financial institutions to meet short-term obligations.
Banks have been told to meet a more lenient LCR level of 60 percent by the end of 2014. The regulator said 44 banks have already met the requirement but it did not give details.
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The regulator said that the new liquidity rules will help reduce banks' "excessive reliance" on interbank funding and said banks faced "hidden perils" in liquidity management.
It also pledged to improve its oversight of banks' loan-to-deposit ratios to better reflect their increasingly diversified liabilities.
Chinese banks' non-performing loan ratio rose to its highest level in two years in the last three months of 2013, official data showed.