The Capital Issues Of Hua Xia Bank And Analysis Of The Countermeasures Under The New Frame Of Capital Regulation

With the birth of Basel III, global bank industry has stepped into a new page with stricter capital regulation. On the basis of core idea of Basel, C hinese regulatory authorities carried out Rules for Regulating the Capital Requirement of Commercial banks(on trial) in June of 2012, with comprehensive consideration of regulatory status and benefit demand of commercial banks. In this way, regulatory capability of bank capital can be integrated with international level and stability of bank system would be strengthened. Additionally, a higher request has been setted by New Rules not only concerns about capital adequacy ratio, but also qualified capital. Meanwhile, the assessment of risk-weighted asset has been adjusted which included the enhanced provisioning requirement of operational risk and a new definition of market risk’s capital weight. On the basis of new calculation standard, the capital adequacy ratio in C hinese commercial banks has declined by 60 to 80 BP. As a result, funding gap in the near future will be enlarged, and many banks would gradually face this heated issue, including the Huaxia bank. Therefore, analyzation of Huaxia bank’s capital predicament not only is a major issue of immediate and far-reaching significance, but also provides certain reference for other commercial banks.In this paper, with Huaxia Bank as the research object, the author compares and analyses the bank capital regulation under new framework and the current status of capital, probing the depth of Huaxia Bank’s capital position, and on this basis estimating the capital shortfall in the coming years. Through estimation it is found that capital gap of Huaxia Bank began to appear in 2016, and it will face a total capital shortfall of about 400 billion in 2018. Huaxia Bank’s overall capital exist the following problems: first, the capital adequacy ratio is low, and the future capital gap is big; second, the capital structure is irrational, other Tier-I capital is missing; the third is a single capital replenishment mode; four, the cost- revenue ratio is too high, over-reliance on net interest revenue; five, non-performing loan ratio is too high, the risk-weighted assets grows faster. This article suggests that to improve the ability to supplement internal capital sources while Hua xia Bank should be step by step, preferentially use subprime write downs bonds to supp lement tier-II capital, about ￥22.4 billion, to ensure that the secondary use of space at least 2% of the capital. Then issue preference share or try to innovate a hybrid capital instruments to complement other tier-I capital to 1%, about ￥11.2 billion. O n the other hand, improve risk management, achieving double down of non-performing loan ratio and risk-weighted asset growth. Optimizing asset allocation by conducting asset securitization business, reducing risk assets. At the same time strengthen the internal control and reinforce internal control.