The Chinese banking industry will not comply with the Basel capital accord when it comes into effect after 2006, according to a report by Dow Jones Newswires.
Dow Jones reports that the head of the international department at China's banking regulatory commission (CBRC), Luo Ping, said China's banks won't adhere to Basel II when it is introduced because of 'objective conditions'.
Ping was confirming comments made in a state press report from the country's banking commissioner Liu Mingkang. The China Securities Journal reported that Mingkang made his decision known in a letter to the BIS, which supervises the capital adequacy framework.
According to the press report, MingKang said China would continue to comply with the capital adequacy framework set in a 1988 accord for several more years.
The report said the letter outlined the potentially negative impact the new framework would have on the country's weaker banks, saying it might put them at a competitive disadvantage.
The CBRC has said Chinese banks will continue implementing a five-tier category for grading loans, which is based on international standards.
Yesterday the Financial Times reported that UK financial institutions based in London have asked for a four-year extension to the Basel II capital accord. US banks and industry lobby groups have also expressed their disquiet at the proposals and the looming end-2006 timetable for introducing the new rules.