The Ministry of Commerce should set up regulations and a licensing system for collateral management companies in wake of the Qingdao metals and other major financing frauds. In making the call, Lai Jinchang, the World Bank's principal operations officer for East Asia and Pacific finance and markets, also criticised the mainland's security interest registry system, which is split between the People's Bank of China and the State Administration for Industry and Commerce. To mitigate problems of multiple pledging of warehouse receipts that might have caused the metals financing fraud uncovered at Qingdao port in June, the Ministry of Commerce should regulate the collateral management industry and introduce licensing requirements, Lai told the South China Morning Post . He said the government should ensure such companies, some of which are set up by logistics firms, meet basic requirements and supervised by the ministry, which oversees trade, retailing and warehousing. "If the companies are not behaving properly, there should be a way of revoking their licence or imposing punishments, such as fines," Lai said. In the Qingdao case and an earlier one involving steel in Shanghai, the collateral management companies could not be punished because of a lack of regulation, he said. Another problem that might have led to financing fraud was the lack of a unified registry for movable collateral, he said. "In other countries with more advanced systems, there is only one unified registry for all security interests on all movable collateral," he said. "But in China this is taken care of by two governmental organisations - the PBOC and the SAIC." While the PBOC had built a web-based registry for receivables that could be easily searched, it remained difficult for lenders to search for any prior interest on mortgaged equipment and inventory registered at the SAIC. Following the fraud cases, the PBOC had included inventory pledges and warehouse receipts in its registry since June, Lai said. The World Bank and other stakeholders had been urging the SAIC to set up a web-based registry for 10 years without success. "The PBOC is a more professional organisation," Lai said. "But the SAIC just doesn't recognise the importance of a web-based registry." Neither the Ministry of Commerce nor the SAIC were available for comment.