CHINA plans to implement new rules on bank liquidity on January 1 to help lenders cope with potential shocks caused by funding difficulties, its banking regulator said yesterday.

Commercial lenders must ensure before the end of 2013 that easily liquidated "premium" assets can fully cover net cash outflows for 30 days under stress conditions, according to draft regulation posted on China Banking Regulatory Commission's website yesterday.

The regulator may limit lenders' acquisitions or raise capital requirements if they fail to lower risk levels or to fix liquidity-management system defects, according to the draft. The CBRC may also restrict foreign-invested banks' asset-to-liability ratios in China and cross-border fund outflows.

Lenders also must meet, by the end of 2016, a minimum 100 percent net stable funding ratio, which measures the adequacy of funds that can be relied on for at least one year under stress conditions, the CBRC said.

Banks should submit stress-test reports quarterly, according to the draft. The CBRC is collecting feedback on its proposals until November 12.

Source:shanghaidaily