Citigroup China meets Basel III requirements

TIANJIN, China (BestGrowthStock) – Citigroup’s China operations meet new capital requirements demanded by regulators, its chief executive for China said, as banks worldwide reacted to new rules agreed at the weekend.

Citi also meets with a comfortable buffer the 8 percent capital adequacy ratio required by China’s Central Banking Regulatory Commission (CBRC), Andrew Au told Reuters on Monday in an interview on the sidelines of the World Economic Forum in China, without giving specific figures.

“We will always support any legislation that will increase the safety and soundness of the financial sector and obviously we need to look at the details and its relevance to our operations in China,” Au said, referring to the Basel III regulations passed on Sunday.

The Basel III regulations will triple to 7 percent the core Tier 1 capital adequacy ratio that banks are required to hold, in an attempt to prevent a repeat of the international credit crisis.

The bank has also been conducting its own stress tests internally to manage its risk profile amid growing fears that a sudden dip in Chinese real estate prices could hit bank earnings or loan portfolios, Au said.

“We continually conduct our own internal stress tests to see how we hold up in different market scenarios … We are reasonably comfortable with the results of these tests,” he said.

The CBRC has ordered Chinese banks to conduct stress tests on their mortgages and has raised the bar for buyers of second and third homes with the aim of cooling the country’s red-hot property sector.

AGGRESSIVE EXPANSION

Citi has been looking to expand aggressively in China, where interest rates on bank deposits are decided by regulators, with plans to open the maximum two branches a month in the country for the rest of the year.

It already operates or has licenses for bank branches in 10 Chinese cities including Beijing and Shanghai, and is looking to grow across the entire banking spectrum including investment, wholesale and retail banking, Au said.

“We are going to grow across the board, because right now the market is so big and it’s growing so fast, you really want to have broad-based growth,” he said.

To differentiate itself from local rivals such as ICBC and Bank of China, Citi is looking to offer products and complete solutions to its institutional and retail customers, he said.

“What you want to be is to become a strategic and transactional partner to the customer. That means people know where the money is coming from and that makes deposits very sticky in a way that wouldn’t be possible with an account that only does bank deposits.”

(Reporting by Kelvin Soh; Editing by Chris Lewis, Greg Mahlich)

Citigroup China meets Basel III requirements