Standard & Poor's is changing its view of China's banking sector. The credit rating agency's overall outlook is 'positive' while it has altered its assessment of the economic risks from 'high' to 'moderately high' and of the industry risks from 'very high' to 'high'. Ryan Tsang, the Greater China director of financial services ratings, said yesterday the improvement in the sector's profile was not just down to injections of government money and foreign investment, but also because of reform efforts, such as the implementation of risk management from headquarters down to branch level. 'But there's still a lot of hard work for the sector to do in coming years,' Mr Tsang said, adding that the reforms were very much a work in progress and setbacks along the road were only to be expected. He pointed to cases of irregularities in the past couple of years that indicated internal controls or risk management systems were not working as well as they should. Other setbacks could arise at individual banks running into resistance from members of staff who are not keen on change. But Mr Tsang believed the government's commitment to the reforms would remain constant with any setbacks only serving to reinforce the view that 'things need to be done and done quickly'. He expected Hong Kong banks to continue to look for growth by tapping the mainland market as loan growth at home has been rather modest in the past few years. 'Growth will be the challenge [for Hong Kong's banking sector] and China will be the answer for most of the banks. We have seen more banks go to China to invest or expand their operations,' he said. Mr Tsang also expected to see further consolidation in the banking sector. 'Pricing and pride will be the key to the speed of the consolidation,' he said, pointing out that because some banks were family-owned businesses, the 'sentimentality factor' could come into play in any takeover deal.