New loan-loss reserve requirement under Basel III set to crimp profits at Chinese banks

A new 2.5% minimum loan-loss reserve requirement to be implemented in China under Basel III is likely to reduce the ability of banks to distribute profits to shareholders

The profitability of Chinese banks is likely to come under increasing pressure following the introduction of a new 2.5% minimum loan-loss reserve requirement on the mainland, according to senior risk management executives.

The new rules come as part of the China Banking Regulatory Commission's (CBRC) efforts to implement more dynamic, contagion-proof measures aimed at upholding the health of the banking system. The CBRC earlier this month issued guidance on a slew of new regulatory requirements