China's banking regulator has issued long-awaited proposals on the treatment of total loss-absorbing capacity requirements, as the country's lenders prepare to meet a funding shortfall estimated at as much as US$1trn. The draft rules are the first time Beijing has addressed the topic in any detail since the Financial Stability Board outlined plans for banks to issue bail-in instruments to stave off the risk of financial crisis in 2015. The new rules incorporate several FSB standards, including the main requirement that the country's global systemically important banks maintain TLAC equivalent to at least 16% of risk-weighted assets by January 2025 and 18% by January 2028. S&P estimates China's G-SIBs are currently Rmb2.25trn (US$335bn) below that threshold and asset growth means that figure could rise to Rmb5.77trn-Rmb6.51trn by 2025. industrial and commercial bank of china, china construction bank, agricultural bank of china and bank of china are the only Chinese banks that qualify as G-SIBs currently, although this is subject to annual review by the FSB.
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