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Banks

UPDATE 1-China says may change draft on capital restrictions

* Regulator says may be some adjustments to draft rules

* Some banks’ capital adequacy ratios have declined

* Banks generally positive about the draft - CBRC

SHANGHAI, Sept 5 (Reuters) - China’s banking regulator may change draft rules it has sent to institutions seeking feedback on changes to banks’ capital restrictions, said an official from the China Banking Regulatory Commission (CBRC) on Saturday.

The rules, a draft of which was released last month, are set to tighten banks’ capital restrictions by excluding subordinated bonds they sell to other banks from their capital base.

“Regarding this, there may be some adjustments,” Jiang Dingzhi, vice chairman of the CBRC, told a banking forum.

After a surge in lending in the first half, some banks saw their capital adequacy ratios decline, Jiang said.

He said the draft rules, when implemented, would have some impact on bank lending but did not provide a timeframe.

The new capital restrictions were among the reasons cited for a fall in the stock market in August, as they prompted concerns about the amount of credit that would be extended over the rest of this year following a burst in lending in the first half. [ID:nSP529534]

The regulator said this week it would only gradually exclude cross-bank holdings of subordinated bonds and similar instruments from banks’ capital base, taking some of the sting out of tighter new rules.

Jiang said banks had generally given positive feedback on the draft rules.

Industry officials had expressed the hope that the tighter restrictions would be phased in over time, rather than forcing banks to exclude all existing such debt at once. (Reporting by Langi Chiang and Jacqueline Wong; Editing by Bill Tarrant and Alex Richardson)

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