The Basle Accord divides on- and off-balance sheet assets of banks into four risk buckets, and then applies a different capital weight to each bucket. The basic idea is that more capital should be required to be held against riskier assets. However, the relationship is rough. Perhaps most troublesome, the same risk weight is applied to all loans.
A series of stringent regulatory measures have been taken to crack down on falsified asset categorization and accounting fraud, and more than RMB4 trillion of nonperforming loans have been disposed of. Sixth, we should be determined to change the distribution of financial assets.