Abstract
Many believe that banks in China are seriously undercapitalised. However, what is a suitable standard for capital adequacy of these banks? Does the Basel Accord apply to them absolutely and sufficiently? This paper reviews the situation and regulation of the capital adequacy of state commercial banks in China. It finds that while government support is proved to be the invisible treasure of state banks, capital enhancement is always desired and the most practical method is to use subordinated debt to increase their supplementary capital.
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1LLB and LLM, China University of Political Science and Law, 1992 and 1995; LLM, University of Warwick, 2002, is Senior Manager at the head office of Industrial and Commercial Bank of China, the largest Chinese commercial bank, where she administers international business and specialises in its legal issues. She is also a member of the Expert Group of Banking Techniques and Practice Commission under the International Chamber of Commerce, China.
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Chen, J. Capital adequacy of Chinese banks: Evaluation and enhancement. J Bank Regul 4, 320–327 (2003). https://doi.org/10.1057/palgrave.jbr.2340149
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DOI: https://doi.org/10.1057/palgrave.jbr.2340149