China's banking regulator has decided to delay the implementation of a new rule that was set to place tougher restrictions on what would count towards banks' capital base, domestic media reported on Thursday. The rules, released last month, would exclude from banks' capital base the subordinated bonds sold to other banks.
The website of the Economic Observer, a weekly newspaper, cited unnamed sources as saying the China Banking Regulatory Commission (CBRC) had issued a notice to banks on Thursday telling them not to deduct their existing cross-holdings of subordinated bonds from their capital base. Instead, only newly issued subordinated bonds and similar instruments would be subject to the new rules, the newspaper reported. "Old debt will follow the old rules, and new debt will follow the new rules," the report said.
The tightened rules were among the reasons cited for a fall in the stock market last month, as they prompted concerns about the amount of credit that would be extended the rest of this year following a burst in lending in the first half. The benchmark Shanghai Composite Index soared 4.8 percent on Thursday after a top regulator assured investors that the market was healthy, sparking hopes of government policy support.