Laws of the People's Republic of China

All the banking regulatory bureaus, State-owned commercial banks as well as joint stock commercial banks:

We hereby print and distribute the Core Indicators for the Risk Management of Commercial Banks (for Trial Implementation) (hereinafter referred to as Core Indicators) are hereby printed and distributed to you, please carry out them accordingly, and the following notification on the related matters are made:

1.

The report of the data involved in the Core Indicators shall comply with the Circular concerning Printing and Distributing the Index System of Off-site Monitoring Statements of China Banking Regulatory Commission Yin Jian Ban Fa [2005] No. 265.

2.

The indicator of "operational risk loss ratio" is meaningful to the evaluation of the operational risks of commercial banks, and its calculation formula and specific specifications shall be determined by China Banking Regulatory Commission (hereinafter referred to as the CBRC) after further study during the process of trial implementation.

3.

This document shall be forwarded by all the banking regulatory bureaus in time to the urban commercial banks, rural commercial banks, rural cooperative banks, urban credit cooperatives, rural credit cooperatives, wholly foreign-funded banks as well as Chinese-foreign equity joint banks under your respective jurisdictions.

4.

The year 2006 is the period of trial implementation for the Core Indicators. The conditions occurred and the opinions for modification proposed during the course of trial implementation shall be fed back by all the banking regulatory bureaus and commercial banks in time to the CBRC (contact person: Guo Wuping of the third department of banks; phone: 010-66194561; e-mail: guowuping@cbrc.gov.cn).

China Banking Regulatory Commission

December 31, 2005

Core Indicators for the Risk Management of Commercial Banks (for Trial Implementation) Chapter I General Provisions

Article 1

In order to strengthen the identification, appraisal and forecast the risks of commercial banks, and effectively prevent financial risks, the core indicators for the risk management of commercial banks are constituted in accordance with such laws and regulations as the Banking Supervision Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks, the Regulation of the People's Republic of China on Managing Foreign-funded Financial Institutions.

Article 2

The Chinese-funded commercial banks established within the territory of the People's Republic of China shall comply with the core indicators for the risk management of commercial banks.

Article 3

The core indicators for the risk management of commercial banks are the benchmarks for carrying out the risk management of commercial banks, and a reference system for evaluating, inspecting and forecasting the risks of commercial banks.

Article 4

In accordance with the prescribed specifications, a commercial bank shall calculate the consolidated and unconsolidated core indicators for risk management at the same time.

Article 5

The horizontal analysis, same-group comparative analysis as well as the inspection and supervision shall be carried out by the CBRC to all core indicators for the risk management of commercial banks, and the supervisory measures shall be taken selectively in accordance with the specific conditions.

Chapter II Core Indicators

Article 6

Such levels as risk level, risk migration as well as risk offset shall be included in the core indicators for the risk management of commercial banks.

Article 7

The risk level indicator is on the basis of the point-of-time data, and is classified as static indicators, including the liquidity risk indicator, credit risk indicator, market risk indicator, as well as operational risk indicator.

Article 8

The liquidity status of commercial banks and its fluctuation shall be assessed by using the liquidity risk indicator which consists of the liquidity ratio, core debt ratio, and liquidity gap ratio, and shall be made separate calculation in accordance with RMB and foreign currency.

(1)

The liquidity ratio refers to the proportion between the balance of liquidity assets and the balance of liquidity liabilities which shall be 25% or higher. The overall level of the liquidity of commercial banks shall be assessed by using it.

(2)

The core debt ratio refers to the proportion between core debts and debts which shall be 60% or higher.

(3)

The liquidity gap ratio refers to the proportion between on-balance-sheet and off-balance-sheet liquidity gap within 90 days and the due on-balance-sheet and off-balance-sheet liquidity assets within 90 days which shall be -10% or higher.

Article 9

The credit risk indicator consists of the ratio of non-performing assets, the credit concentration ratio of a single group client as well as the generalized correlation ratio.

(1)

The ratio of non-performing assets refers to the proportion between non-performing assets and the total amount of assets which shall be 4% or lower. This indicator is a first-class one, with one second-class indicator-ratio of non-performing loans included; and the ratio of non-performing loans refers to the proportion between non-performing loans and the total amount of loans which shall be 5% or lower.

(2)

The credit concentration ratio of a single group client refers to the proportion between the total credit amount of the largest group client and the net capital which shall be 15% or lower. This indicator is a first-class one, with one second-class indicator-the loan concentration ratio of a single client included; and the loan concentration ratio of a single client refers to the proportion between the total amount of loans of the largest client and the net capital which shall be 10% or lower.

(3)

The generalized correlation ratio refers to the proportion between the generalized relevant credits and the net capital which shall be 50% or lower.

Article 10

The risks of commercial banks resulted from altering foreign exchange rates and interest rates by using the market risk indicator which consists of the ratio of accumulative open foreign exchange positions and the interest rate risk sensitivity.

(1)

The ratio of accumulative open foreign exchange positions refers to the proportion between accumulative open foreign exchange positions and the net capital, and shall be 20% or lower. Other methods (such as risk valuation method and basic-point present value method) shall be adopted by a qualified commercial bank at the same time to measure foreign exchange risks.

(2)

The interest rate risk sensitivity refers to the proportion between the impacts of the increase of 200 base points of interest rate to the net bank value and the net capital, and the index value shall be separately constituted in accordance with the actual risk supervisory requirements after the promulgation of the related policies.

Article 11

The risks resulted from imperfect internal procedures, omissions or frauds of operational staff or external affairs shall be assessed by using the operational risk indicator, and is expressed as the loss ratio of operational risks, that is, the proportion between the losses resulted from operations and the incomes from net interests of the previous three phases plus the average value of non-interest incomes.

The index shall be constituted by the CBRC after the promulgation of the related policies.

Article 12

The degree of risk changes of commercial banks shall be assessed by using the risk migration indicator which is expressed as the ratio of asset quality from the previous phase to the current phase, and be classified into a dynamic indicator. This indicator consists of the migration ratio of pass loans and the migration ratio of non-performing loans.

(1)

The migration ratio of pass loans refers to the proportion between the amount of non-performing loans changing from pass loans and the pass loans. The pass loans consist of the pass loans and the loans of other asset especially mentioned (OAEM). This indicator is a first-class one, with such two second-class indicators as the migration ratio of pass loans and the migration ratio of OAEM loans included: the former means the proportion between the amount of the last four kinds of loans changing from the pass loans and the pass loans, and the latter means the proportion between the amount of non-performing loans changing from the OAEM loans and the OAEM loans.

(2)

The migration ratio of non-performing loans consists of the migration ratio of substandard loans and the migration ratio of doubtful loans. The migration ratio of substandard loans means the proportion between the amount of doubtful loans and loss loans changing from the substandard loans and the substandard loans, and the migration ratio of doubtful loans means the migration ratio of loss loans came from the doubtful loans to the doubtful loans.

Article 13

The ability of commercial banks to offset the risk losses shall be assessed by using the risk offset indicator which consists of the profitability, reserve adequacy degree and capital adequacy degree and other aspects.

(1)

The profitability indicator consists of such three parts as the cost/income ratio, return on assets, and return on capital. The cost/income ratio means the proportion between business expenses adding depreciation and the business incomes, and shall be 45% or lower; the return on assets means the proportion between after-tax net profits and the average total amount of assets, and shall be 0.6% or higher; and the return on capital refers to the proportion between after-tax net profits and the average net assets, and shall be 11% or higher.

(2)

The indicator of reserve adequacy degree consists of the loss reserve adequacy ratio of assets and the loss reserve adequacy ratio of loans. The loss reserve adequacy ratio of assets is classified into a first-class indicator - the proportion between actual reserves of credit risk assets and the required reserves, and shall be 100% or higher; and the loss reserve adequacy ratio of loans means the proportion between actual reserves of loans and the required reserves, shall be 100% or higher, and is a second-class indicator.

(3)

The indicator of capital adequacy degree consists of the core capital adequacy ratio and the capital adequacy ratio: the former refers to the proportion between core capital and risk-weighted assets, and shall be 4% or higher; and the latter refers to the proportion between core capital adding subordinate capital and the risk-weighted assets, and shall be 8% or higher.

Chapter III Check and Supervision

Article 14

A statistical and information system consistent with these measures shall be set up by a commercial bank in order to exactly reflect its risk level, risk migration and risk offsetting abilities.

Article 15

By reference to the Guidelines for the Classification of Loan Risks, the non-credit assets shall be divided into normal assets and non-performing assets by a commercial bank, so as to calculate the risks of non-credit assets and assess the quality of non-credit assets.

Article 16

All the indicators shall be incarnated in the daily risk management by a commercial bank, and the risk management methods shall be perfected.

Article 17

The actual value of all the indicators shall be made regular examination by the board of directors of a commercial bank, and the management personnel shall be urged to take correction measures.

Article 18

The CBRC shall make regular collection on the related data through the off-site supervisory system, make analysis on all the supervisory indicators of commercial banks, make evaluation and forecast on their risk level, risk migration as well as risk offset in time.

Article 19

The on-site inspections shall be organized by the CBRC to make verification on the authenticity of data, and main risks of commercial banks with priority shall be inspected in accordance with the actual value of core indicators, and admonitory talks and risk presentation shall be implemented.

Chapter IV Supplementary Provisions

Article 20

These Core Indicators by analogy shall be complied with by rural cooperative banks, urban credit cooperatives, rural credit cooperatives, wholly foreign-funded banks as well as Chinese-foreign joint equity banks, unless it is otherwise prescribed by any law or regulation.

Article 21

Unless it is otherwise prescribed by any law, administrative regulation or ministerial rule, any administrative punishment shall be carried out directly based on these Core Indicators.

Article 22

The CBRC has the power to interpret the core indicators for the risk management of commercial banks.

Article 23

The core indicators for the risk management of commercial banks shall go into effect as of January 1, 2006. The Management Controlling and Monitoring Indicators for the Proportion of Assets and Liabilities of Commercial Banks and the Assessment Methods (Yin Fa [1996] No. 450) shall be abolished at the same time.

Appendix 1:

Table of Core Indicators for the Risk Management of Commercial Banks

Appendix 2:

Instructions for the Coverage of Core Indicators for the Risk Management of Commercial Banks

　　I. Risk Level
　　i. Liquidity risk
　　1. Liquidity ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Liquidity ratio = liquidity assets / liquidity liabilities〜100%
　　Indicator Explanations:
　　Liquidity assets consist of cash, gold, excess deposit reserves, net assets after inter-bank transaction differences to be mature within one month, receivable interests and other receivables to be mature within one month, pass loans to be mature within one month, securities investments to be mature within one month, bond investments convertible at any time at the secondary market domestic or abroad, as well as other convertible assets to be mature within one month (excluding non-performing assets).
　　Liquidity liabilities consist of the current deposits (excluding fiscal deposits), time deposits to be mature within one month (excluding fiscal deposits), net liabilities after inter-bank transaction differences to be mature within one month, issued bonds to be mature within one month, payable interests and all the accounts payable to be mature within one month, loans from the Central bank to be mature within one month, as well as other liabilities to be mature within one month.
　　2. Core debt dependency
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Core debt dependency = core debts / total debts 〜100%
　　Indicator Explanations:
　　The core debt dependency consists of the time deposits to be mature in three months or longer, the issued bonds, and 50% of current deposits.
　　The term "total debts" means the balance of all the liabilities in the balance sheet constituted in accordance with the accounting system for financial enterprises.
　　3. Liquidity gap ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Liquidity gap ratio = liquidity gap / on-balance-sheet and off-balance-sheet assets to be mature within 90 days〜100%
　　Indicator Explanations:
　　The liquidity gap means the balance of on-balance-sheet and off-balance-sheet assets to be mature within 90 days minus the on-balance-sheet and off-balance-sheet debts to be mature within 90 days.
　　ii. Credit risk
　　4. Ratio of non-performing loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Ratio of non-performing loans = non-performing credit risk assets / credit risk assets〜100%
　　Indicator Explanations:
　　The term "credit risk assets" means the on-balance-sheet and off-balance-sheet assets in the balance sheet of a bank for assuming credit risks, and mainly consists of all the loans, inter-bank deposits, inter-bank offers, purchase of reverse-sale assets, bond investments of bank accounts, receivable interests, other receivables, commitments and contingent debts, etc.
　　The term "non-performing credit risk assets" means the part of non-performing assets among the credit risk assets. The "non-performing loans" is a part of non-performing credit risk assets, and has the same definition as that in the "ratio of non-performing loans"; and the CBRC shall separately constitute the classification standards for the credit risk assets excluding loans.
　　4.1 Ratio of non-performing loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Ratio of non-performing loans = (substandard loans + doubtful loans + loss loans) / all the types of loans〜100%
　　Indicator Explanations:
　　The Guidelines for the Classification of Loan Risks (Yin Fa [2001] No. 416), the Circular concerning Promoting and Improving the Classification of Loan Risks (Yin Jian Fa [2003] No. 22) and other related legal provisions shall apply to the classification standards for five grades of loans.
　　The term "pass loans" is defined as the loans for which the borrower can carry out the contract and there are not enough reasons to doubt that the principal or interests of loans could not be repaid in time or in full amount. The "OAEM loans" is defined as the loans for which the borrower has the ability to repay the principal and interests of loans at present but there are some unfavorable factors that may affect the said repayment. The "substandard loans" is defined as the loans for which there is a noticeable problem in the borrower's repayment ability, the repayment of principal and interests of loans in full amount could not be ensured by the borrower's normal business incomes, even if the guarantee is provided, certain losses would be caused. The "doubtful loans" is defined as the loans for which the borrower could not repay both the principal and interests of loans in full amount, and even if guarantee has been provided, fairly large losses would be caused. The "loss loans" is defined as the loans for which the principal or interests could not be recovered or only a fairly small part thereof could be recovered even after every possible measure or necessary legal procedures has been taken. After the classification of all the types of loans, the last three types of loans are generally defined as "non-performing loans".
　　The term "All the types of loans" means the assets formed after banking financial institutions lend the monetary capital to borrowers, and mainly consists of the loans, trade financing, instrument financing, financing lease, purchase of reverse-sale assets from non-financial institutions, overdrafts, as well as various advances, etc.
　　5. Credit concentration ratio of a single group client
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Credit concentration ratio of a single group client = total credit amount of the largest group client / net capital〜100%
　　Indicator Explanations:
　　The term "credit concentration ratio of a single group client" means total credit amount of a single group client getting the highest amount of credits at the end of reporting period.
　　The term "credits" means the capital lent by commercial banks directly to non-financial-institution clients, or the commitments made for compensations and payment liabilities to be assumed by clients in related economic activities, consisting of loans, trade financing, instrument financing, financing lease, overdrafts, various advances and other on-balance-sheet businesses, and instrument acceptance, issuance of letter of credit (L/C), letter of guarantee and standby L/C, L/C confirmation, guarantee for bond issuance, guarantee for loans, sale of assets with recourse, unused irrevocable loan commitments and other off-balance-sheet businesses.
　　The Guidelines for the Risk Management of Commercial Banks for Granting Credits to Group Clients (Decree No. 5 of the CBRC [2003]) and other related legal provisions shall apply to the definition of "group clients".
　　The definition of "net capital" is consistent with that in the indicator of capital adequacy ratio.
　　5.1 Loan concentration ratio of a single client
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Loan concentration ratio of a single client = total amount of loans of the largest client / net capital〜100%
　　Indicator Explanations:
　　The term "total amount of loans of the largest client" means the total amount of all the types of loans of a client having the highest balance of all the types of loans at the end of reporting period.
　　The term "clients" means the legal persons, other economic organizations, individual industrial and commercial households as well as natural persons who have gained loans.
　　The definition of "all the types of loans" is consistent with that in the indicator of non-performing loan ratio.
　　The definition of "net capital" is consistent with that in the indicator of capital adequacy ratio.
　　6. Generalized correlation ratio
　　Calculation formula:
　　Generalized correlation ratio = total amount of credits of all the relevant parties / net capital 〜100%
　　Indicator Explanations:
　　The term "total amount of credits of all the related parties" means the balance of credits of all the related parties of commercial banks deducted by both the earnest money deposits provided by the relevant parties when the credits are granted and the pledged bank deposit receipts and the amount of government bonds.
　　The Administrative Measures for the Connected Transactions between Commercial Banks and Their Insiders or Shareholders (No. 3Order of the CBRC [2004]) and other related legal provisions shall apply to the "related parties" in this indicator. The "related parties" consist of related natural persons, legal persons as well as other organizations.
　　The definitions of both credits and group clients are consistent with those in the credit concentration ratio of a single group client.
　　The definition of "net capital" is consistent with that in the indicator of capital adequacy ratio.
　　iii. Market risk
　　7. Ratio of accumulative open foreign exchange positions
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Ratio of accumulative open foreign exchange positions = accumulative open foreign exchange positions / net capital〜100%
　　Indicator Explanations:
　　The term "accumulative open foreign exchange positions" means the balance of the foreign exchange assets with sensitive bank foreign exchange rates minus the foreign exchange debts with sensitive foreign exchange rates.
　　The definition of "net capital" is consistent with that in the indicator of capital adequacy ratio.
　　8. Interest rate risk sensitivity
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Interest rate risk sensitivity = impacts of the increase of 200 base points of interest rates on the net value of banks / net capital〜100%
　　Indicator Explanations:
　　Under the circumstance that the interest rate horizontally rises 200 base points, this indicator is used to calculate the impacts of interest rate changes upon the economic value of banks. The indicator calculation is on the basis of the duration analysis, that is, to divide all the interest-bearing assets and the interest-repaying debts of banks into different durations in accordance with the re-pricing periods. The re-pricing "gap" for the duration is obtained from the assets with sensitive interest rates minus the debts with sensitive interest rates, then adding the off-balance-sheet provisions within the said duration. The impacts of given interest rate changes concerning the economic value of banks are assessed by collecting the weighted gaps formed by putting related sensitive weights to the gaps of all the durations, at all the durations.
　　The phrase "impacts of the increase of 200 base points of interest rates on the net value of banks" is used to calculate the influences on the economic value under the circumstance that the given interest rate rises to 200 base points, of which, the division of durations and the sensitivity weights of each duration shall comply with the standard frameworks determined in the Principles of the Basel Committee for Managing and Supervising Interest Rate Risks by analogy.
　　The definition of "net capital" is consistent with that in the indicator of capital adequacy ratio.
　　II. Risk Migration
　　9. Migration ratio of pass loans
　　The data on the coverage of RMB and foreign currency hall be made separate calculation by using this indicator.
　　Calculation formula:
　　Migration ratio of pass loans = (amount of non-performing loans coming from pass loans at the initial stage + amount of non-performing loans coming from OAEM loans at the initial stage) / (balance of pass loans at the initial stage - amount reduced during the period of pass loans at the initial stage + balance of OAEM loans at the initial stage - amount reduced during the period of OAEM loans at the initial stage) 〜100%
　　Indicator Explanations:
　　The phrase "amount of non-performing loans coming from pass loans at the initial stage" means the amount of all the balances of substandard / doubtful / loss loans classified at the end of reporting period among the pass loans at the initial stage.
　　The phrase "amount of non-performing loans coming from the OAEM loans at the initial stage" means the amount of all the balances of substandard / doubtful / loss loans classified at the end of reporting period among the OAEM loans at the initial stage.
　　The phrase "amount reduced during the period of pass loans at the initial stage" means the loans reduced because of the normal recovery of loans, disposal of non-performing loans or cancel after verification of loans, etc. within the reporting period among the pass loans at the initial stage.
　　The phrase "amount reduced during the term of OAEM loans at the initial stage" means the loans reduced because of the normal recovery of loans, disposal of non-performing loans or cancel after verification of loans, etc. within the reporting period among the OAEM loans at the initial stage.
　　The definitions of "pass loans, OAEM loans and non-performing loans" are consistent with those in the indicator of non-performing loan ratio.
　　9.1 Migration ratio of pass loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Migration ratio of pass loans = amount migrated to the lower grades from the pass loans at the initial stage / (balance of pass loans at the initial stage - amount reduced during the period of pass loans at the initial stage)〜100%
　　Indicator Explanations:
　　The phrase "amount migrated to the lower grades from the pass loans at the initial stage" means the amount of all the balances of substandard / doubtful / loss loans classified at the end of reporting period among the pass loans at the initial stage.
　　The definition of "amount reduced during the period of pass loans at the initial stage" is consistent with that in the indicator of non-performing loan ratio.
　　The definition of "pass loans" should be consistent with that in the indicator of non-performing loan ratio.
　　9.2 Migration ratio of OAEM loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Migration ratio of OAEM loans = amount migrated to the lower grades from the OAEM loans at the initial stage / (balance of OAEM loans at the initial stage - amount reduced during the period of OAEM loans at the initial stage)〜100%
　　Indicator Explanations:
　　The phrase "amount migrated to the lower grades from the OAEM loans at the initial stage" means the amount of all the balances of substandard / doubtful / loss loans classified at the end of reporting period among the OAEM loans at the initial stage.
　　The definition of "amount reduced during the period of OAEM loans at the initial stage" is consistent with that in the indicator of non-performing loan ratio.
　　The definition of "OAEM loans at the initial stage" is consistent with that in the indicator of non-performing loan ratio.
　　10. Migration ratio of substandard loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Migration ratio of substandard loans = amount migrated to the lower grades from the substandard loans at the initial stage / (balance of substandard loans at the initial stage - amount reduced during the period of substandard loans at the initial stage)〜100%
　　Indicator Explanations:
　　The phrase "amount migrated to the lower grades from the substandard loans at the initial stage" means the amount of all the balances of doubtful / loss loans classified at the end of reporting period among the substandard loans at the initial stage.
　　The phrase "amount reduced during the period of substandard loans at the initial stage" means the loans reduced because of the normal recovery of loans, disposal of non-performing loans or cancel after verification of loans, etc. within the reporting period among the substandard loans at the initial stage.
　　The definition of "substandard loans" is consistent with that in the indicator of non-performing loan ratio.
　　11. Migration ratio of doubtful loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Migration ratio of doubtful loans = amount migrated to the lower grades from the doubtful loans at the initial stage / (balance of doubtful loans at the initial stage - amount reduced during the period of doubtful loans at the initial stage)〜100%
　　Indicator Explanations:
　　The phrase "amount migrated to the lower grades from the doubtful loans at the initial stage" means the amount of balance of loss loans classified at the end of reporting period among the doubtful loans at the initial stage.
　　The phrase "amount reduced during the period of doubtful loans at the initial stage" means the loans reduced because of the normal recovery of loans, disposal of non-performing loans or cancel after verification of loans, etc. within the reporting period among the doubtful loans at the initial stage.
　　The definition of "doubtful loans" is consistent with that in the indicator of non-performing loan ratio.
　　III. Risk Offset
　　i. Profitability
　　12. Cost/income ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Cost/income ratio = business expenses / business incomes〜100%
　　Indicator Explanations:
　　The phrase "business expenses" means the business expenses in the income and expense statements constituted in accordance with the requirements set down in the accounting system for financial enterprises.
　　The phrase "business incomes" means the net incomes from interests and other business incomes in the income and expense statements constituted in accordance with the requirements set down in the accounting system for financial enterprises.
　　13. Return on assets
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Return on assets = net profits / average balance of assets〜100%
　　Indicator Explanations:
　　The phrase "net profits" means the net profits in the income and expense statements constituted in accordance with the requirements set down in the accounting system for financial enterprises.
　　The term "assets" means the balance of total assets in the balance sheet constituted in accordance with the requirements set down in the accounting system for financial enterprises.
　　14. Return on capital
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Return on capital = net profits / average balance of owner's equities〜100%
　　Indicator Explanations:
　　The "owner's equities" means the balance of owner's equities in the balance sheet constituted in accordance with the requirements set down in the accounting system for financial enterprises.
　　The definition of "net profits" is consistent with that in the indicator of return on assets.
　　ii. Reserve adequacy degree
　　15. Asset loss reserve adequacy ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Loss reserve adequacy ratio of assets = actual reserves for credit risk assets / required reserves for credit risk assets〜100%
　　Indicator Explanations:
　　The phrase "actual reserves for credit risk assets" means the actual reserves of a bank for the losses anticipated in accordance with credit risk assets.
　　The phrase "required reserves for credit risk assets" means the amount of required reserves in accordance with the risk classification of credit risk assets. Of which, the determination of the required reserves for loans shall comply with the Guidelines for the Provision of Reverses for Loan Losses (Yin Fa [2002] No.98) and other related legal provisions; and the required reserves for the credit risk assets excluding loans shall be separately constituted by the CBRC.
　　The definition of "credit risk assets" is consistent with that in the indicator of non-performing asset ratio.
　　15.1 Loss reserve adequacy ratio of loans
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Loss reserve adequacy ratio of loans = actual reserves for loans / required reserves for loans〜100%
　　Indicator Explanations:
　　The term "actual reserves for loans" means the actual reserves prepared by a bank in light of the loan losses anticipated.
　　The Guidelines for the Provision of Reverses for Loan Losses (No. 98 [2002] of the People's Bank of China) and other related legal provisions shall apply to the determination of the "loans".
　　iii. Capital adequacy degree
　　16. Capital adequacy ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Capital adequacy ratio = net capital / (risk-weighted assets + market risk capital multiplied by 12.5 times)〜100%
　　Indicator Explanations:
　　The term "net capital" means the core capital of a commercial bank adding the subordinate capital, and then minus the deduction items.
　　The Measures for Managing Capital Adequacy Ratio of Commercial Banks (Order No. 2 of the CBRC [2004]) and other related legal provisions shall apply to the definitions and calculation methods of "net capital, subordinate capital, deduction items, risk-weighted assets and market risk capital".
　　16.1 Core capital adequacy ratio
　　The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
　　Calculation formula:
　　Core capital adequacy ratio = net value of core capital / (risk-weighted assets + market risk capital multiplied by 12.5 times)〜100%
　　Indicator Explanations:
　　The phrase "net value of core capital" means the core capital of a commercial bank minus the deduction items of core capital.
　　The Measures for Managing Capital Adequacy Ratio of Commercial Banks (Order No. 2 of the CBRC [2004]) and other related legal provisions shall apply to the definitions and calculation methods of "core capital, deduction items of core capital, risk-weighted assets and market risk capital".
　　Notes: The instructions of the CBRC for filling out the off-site supervisory statements shall apply to the detailed definitions and requirements for filling out the items in the aforesaid indicators.