Zhitong Finance learned from a research report by Minsheng Securities that on November 1, 2023, the China Banking and Insurance Regulatory Commission released the "Capital Management Measures for Commercial Banks." The new capital regulations will officially take effect on January 1, 2024. The bank believes that the introduction of new capital regulations has a short-term positive effect on the capital adequacy ratio of commercial banks. After the implementation of new capital regulations, the overall capital adequacy level of the banking industry is stable, and the average capital adequacy ratio is gradually increasing. In the long run, it will guide banks to better serve the real economy. The new regulations adjust the risk weight of assets to guide the asset allocation structure of banks and support financial services entities and encourage banks to return to the source of credit. Along with the gradual recovery of the economy, bank credit will be expected to improve. Maintain the industry's "recommended" rating.

The main points of Minsheng Securities are as follows:

Establish a differentiated regulatory system.In accordance with the adjustments made by commercial banks to their on- and off-balance sheet asset balances and overseas debt balances, the new capital regulations classify commercial banks into three categories and adopt different regulatory requirements for banks with different sizes and business styles.

Expanding the scope of Tier 2 capital supplementation.In the new capital regulations, in addition to the excess loan loss reserve that can be included in Tier 2 capital, excess loss reserves for non-credit assets can also be included in Tier 2 capital. However, considering that there is also an upper limit for supplement, the calculation shows that among the 42 listed banks, 9 still have room to benefit from this change.

Asset management products: the more penetrative, the lower the capital consumption.For asset management products in bank books, the new capital regulation proposes three types of measurement rules: penetration method, authorization-based method, and 1250% weight method, depending on how much penetrative information the bank can obtain. Specifically, the risk weight of currency funds and non-indexed bond funds may increase, and the impact on indexed bond funds, directional asset management plans and customized funds is relatively small. From the perspective of capital pressure, banks may prefer asset management products that are easier to penetrate and manage; at the fund company level, they may actively adapt to changes, such as increasing the layout of products with stable risk weights, detailed information disclosure, etc.

On-balance sheet credit: increased exposure to real estate risk.In the new capital regulations, the overall risk weight for credit risks tends to be lowered, guiding banks to return to the source of credit. For the first-tier banks, the risk weights for investment-grade and small and medium-sized enterprise classification of corporate loans have been reduced from 100% to a lower level. In terms of retail loans, the new regulation proposes the regulatory concept of "small and dispersed," and lowers the risk weight of high-quality credit card business; In real estate, the risk weight for non-prudential real estate development loans has increased, and the individual mortgage loans have been further refined, with the overall risk weight trending down.

Self-investment: mainly affects local government general bonds and inter-bank investments.For the first-tier banks, the risk weight for local government general bonds has been reduced from 20% to 10%. In terms of interbank investments, considering that most of the counterparty commercial banks are rated A, the risk weight of commercial bank ordinary bonds and interbank certificates of deposit for more than 3 months have been increased from 25% to 40%. Risk weights for additional investment-grade classifications of other financial institutions have been lowered from 100% to 75%. Although the risk weights for subordinated debt risks have increased from 100% to 150%, except for policy banks, the proportion of banks' own investments in Tier 2 bonds is not high, and the impact on the capital adequacy ratio is limited. Moreover, considering that the allocation of Tier 2 bonds is not only affected by capital pressure, large-scale divestment of Tier 2 bonds by banks' own investments is unlikely.

Impact on banks:The capital adequacy ratio is stable and gradually increasing. Using static calculations based on data from 42 listed banks in 23H1, the bank found that the core Tier 1 capital adequacy ratio of most listed banks has been improved to some extent, which is basically consistent with the feedback from the China Banking and Insurance Regulatory Commission in response to reporters. According to the "responses to reporters," the China Banking and Insurance Regulatory Commission stated that "calculations show that after the implementation of the new capital regulations, the overall capital adequacy level of the banking industry is stable, and the average capital adequacy ratio is stable and gradually increasing."