Regulator to strengthen supervision ( 2003-08-26 08:07) (China Daily)
The China Banking Regulatory
Commission (CBRC) yesterday pledged to strengthen its regulation of foreign
banks operating in the country, with a focus on risk supervision.
"Generally speaking, foreign bank operations in China remain smooth and
stable, but certain risks still demand attention,'' said Liu Mingkang, president
of the newly-established top banking industry watchdog at yesterday's Foreign
Bank China Head Meeting.
He made a promise at the meeting, the first of its kind since 1979, that his
commission will further improve its supervision capability concerning foreign
banks by referring to the Core Principles for Effective Banking Supervision.
The Core Principles, recognized as global standards for prudent regulation
and supervision in the banking industry, were issued by the Basel Committee on
Banking Supervision in September 1997 and endorsed by the international
financial community during the annual meeting of the International Monetary Fund
and the World Bank in Hong Kong in October 1997.
Wang Zhaoxing, a CBRC director who is in charge of foreign bank affairs,
elaborated at the meeting that the commission's regulation on foreign banks in
the coming years will focus on how to help prevent their potential risks.
According to Wang, 24 foreign banks in China saw their non-performing loan
rate exceed 20 per cent, with seven of them having the rate climb as high as 90
per cent.
Wang also cautioned that a few foreign financial institutions had reported
fraud profitability and violated the country's banking industry regulations
while operating their business in China.
Wang therefore pledged to enhanced regulation on new financial products
launched by foreign banks in the coming years, with special attention to be paid
to "those troublesome banks.''
Raymond Yu, head of the Bank of East Asia's China Office yesterday gave a nod
to the CBRC's resolution yesterday. But Yu also made a plea on behalf of the
country's foreign banks at the meeting, saying that the CBRC needs to enhance
its communications with its to-be-established provincial branches so as to stick
to uniform regulation standards across the country.
"China's financial market is no doubt enormous but we expect for a unified
banking regulation around the country, which will facilitate our expansion in
the Chinese market,'' said Yu.
CBRC statistics show that banks from 19 countries and regions have set up 184
institutions on the Chinese mainland, with a total registered capital of US$41.2
billion.
Nine cities have allowed qualified foreign banks to provide RMB services.
And five foreign banks have approved as Qualified Foreign Institutional
Investor (QFII) custodians, according to the commission.
The Chinese Government will stick to its commitments to the World Trade
Organization to gradually open its financial markets, said Liu.
"We will maintain a clear and stable regulated banking environment to further
encourage foreign banks to continue to invest and participate in the development
of China's banking sector,'' he said.
In another development, CBRC yesterday afternoon signed a co-operative
memorandum with its Hong Kong Monetary Authority in Shanghai.
The memo followed the previous one signed by the CBRC and the Monetary
Authority of Macao last Friday in Beijing.
Under the two memos, the CBRC will closely co-operate with its counterparts
in Hong Kong and Macao to jointly handle financial risks and propel the healthy
development of China's banking industry.
