FILE PHOTO: The headquarters of the People’s Bank of China, the central bank, is pictured in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. REUTERS/Jason LeeReuters
HONG KONG (Reuters) – China’s central bank and banking and insurance regulator set up a counter-cyclical capital buffer mechanism on Wednesday to help banks fend off risk and to keep the financial system stable.
The buffer aims to protect the banking sector from periods of excess aggregate credit growth that could imply rising financial risk.
The initial ratio was set at zero, which means no additional capital requirements for banks for now.
The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission will regularly assess and adjust buffer requirements to prevent systemic risk, they said.
The new mechanism “is an important measure to improve the macro-prudential policy framework and enrich