What Is a Regulatory Asset?

Regulatory capital refers to the capital that the regulatory authority requires banks to hold. Supervisory authorities generally stipulate the minimum amount of capital that banks must hold, so regulatory capital is also called minimum capital. The minimum capital is a requirement of the regulatory authority, so it must be clear and enforceable. The calculation method should be determined in advance. The minimum capital of different banks can be compared horizontally and vertically. Because the calculation method of the minimum capital is relatively simple, the general public can also master the rules and calculation methods of the minimum capital. The minimum capital is the capital standard of the best banks, and other banks should hold higher capital.

Regulatory capital

Performance evaluation trends

(I) Performance Evaluation of Traditional Commercial Banks

Performance evaluation comparison

measure

At present, the four domestic state-owned commercial banks have tried to establish a performance evaluation system with a core rate of return on economic capital. The scope of CCB's economic capital measurement covers four aspects: credit risk, market risk, operational risk and capital occupation. Its credit risk capital allocation adopts the incremental allocation method. The economic capital allocation and measurement results are based on the performance of economic growth. An important part of the system and incentive and restraint mechanisms; Bank of China introduced the concept of economic capital in 2004. The measurement of the economic capital of each branch only covers credit risk, and economic capital management has been incorporated into the credit management process; The "Interim Measures for the Management of Economic Capital of Agricultural Bank of China" was formulated and issued to increase business adjustment; ICBC is also studying the method of allocating economic capital to business units. Among the joint-stock commercial banks, some of the joint-stock banks represented by China Merchants Bank and China Everbright Bank have begun to realize the necessity of transforming traditional strategic management methods and tried to establish an economic capital management system. However, the current internal rating system and risk management system of domestic banks cannot provide real economic capital data, and choosing to use regulatory capital instead of economic capital is a realistic choice for commercial banks during the transition period. From the practice of the Chinese banking industry, the establishment and implementation of a regulatory capital allocation mechanism can promote commercial banks to strengthen the concept of capital restraint to control the total amount of risk, promote structural adjustment and stimulate value creation. The CBRC encourages commercial banks to actively explore capital management models, promote commercial banks to establish and continuously improve the regulatory capital allocation system, and then transition to economic capital management, establish a performance evaluation system centered on RAROC, and gradually improve the risk management level of commercial banks.

Regulatory capital