China's banking regulator and the central bank plan to adopt a more differentiated regulatory system for assessing commercial banks' capital adequacy and risk management to prevent risks in the country's financial system.

On Saturday, the China Banking and Insurance Regulatory Commission and the People's Bank of China jointly released amended draft rules to help banks "continuously improve the precision of risk measurement and guide banks to serve the real economy better."

The draft rules, which bring the banking sector closer to global standards, will divide lenders into three groups based on a business scale and risk level.

The rules will apply a differentiated regulatory system to banks. Lenders with a relatively large scale of assets or rather large cross-border business will be under stricter capital requirements and will have to disclose more information to regulators.

In addition, the rules will include more specific factors to measure banks' risk exposure to mortgage lending, such as the types of property, sources of repayments, and loan-to-value ratios.

Once a pillar of growth, China's property market has slowed sharply over the past year, hobbled by weak demand and mounting debt defaults by developers.

The two regulators said implementing the new rules would leave capital adequacy ratios in the banking sector unchanged, though some banks' percentages would change slightly.

The commission and central bank sought public comment before implementing the changes on Jan. 1, 2024.