New Regulations on the Supervision of Foreign-funded Banks in China

Foreign banks have achievedremarkable development in China since theintroduction in 1980, and so far there are 135institutions doing business in our country.With the increasing number of foreign-fundedfinancial institutions and the developmentof their businesses, China has made someadjustments to its policies and laws governingforeign banks in recent years, which aredemonstrated in the following aspects.Ⅰ Regions: In August, 1994, 11 cities wereapproved to set up business institutions offoreign banks. So far, the number of suchcities has increased to 24, as follows: Beijing,

NEW REGULATION BY THE PEOPLE'S BANK OF CHINA-TRADING B STOCKS ABROAD,OPENING ACCOUNTS IN CHINA

The People’s Bank of China promulgated andput in force days ago Regulation on Foreign Ex-change Accounts in China, according to which for-eign individuals or legal persons can open foreignexchange accounts to keep foreign exchange fortrading B stock in China.As stipulated by the regulation, as to foreigncurrency stock accounts opened bydomestic insti-tutions with the income from issuing stocks, theirreceipt shall be income from issuing stocks anddisbursement shall be used for the purposes pro-vided for in the prospectus approved by securitiessupervising organs; as to foreign exchange ac-counts opened by foreign individuals or legal per-sons for trading B stocks in China.their receipt shallbe the income of trading stocks and foreign ex-change remitted or brought in from abroad, andtheir disbursement shall be used for buying andselling stocks.As provided in the regulation, for the purposeof opening B stock account to trade B stocks

Calibrating the Level of Capital： The Way We See It

This paper aims to propose a framework for estimating the optimal levels of capital at banks, elaborating factors such as liquidity and macroeconomic conditions. Firstly, as a preamble, the authors attempt to reorganize the variety of policy proposals for enhancing financial sector regulation. In light of the broad perspective of the prudential policy framework, the authors discuss the role of bank capital in enhancing banking-sector resilience. Secondly, the authors lay out an early warning system （EWS） to predict a financial crisis where the role of capital and liquidity are explicitly captured. Then, the authors apply the EWS as a component of a cost-benefit analysis （CBA） to gauge the benefit from raising capital and liquidity requirements, as more stringent regulations are expected to reduce the probability of financial ,crisis. On the other hand, financial-sector regulations should come along with certain costs. To quantify the cost, the authors employ some existing macroeconomic models to estimate the cost of raising capital and liquidity requirements. Combining the EWS （for benefit calculation） with the macroeconomic models （for cost calculation）, the authors provide a full-fledged CBA framework that can detemaine the optimal levels of capital that strike the right balance between the costs and benefits of the financial-sector regulation. The main results indicate that the optimal level of bank capital would considerably vary depending on the level of liquidity indicators both on the asset and liability sides of banks＇ balance sheets as well as macroeconomic conditions, typically represented by housing market inflation. Finally, the CBA framework suggests that banks could stand in a better shape with a counter-cyclical capital buffer to be well-prepared for a prospective distress.