Banking & Finance

China’s banking regulator steps up fight against financial risk amid threat of ‘chaos’ in sector

Violations in corporate governance, property loans and disposal of non-performing assets will be punished more strictly, watchdog says

PUBLISHED : Sunday, 14 January, 2018, 12:59pm
UPDATED : Sunday, 14 January, 2018, 8:54pm

China will step up oversight in the banking sector this year to reduce financial risks, the country’s banking regulator said, stressing that long-term efforts would be needed to control “chaos” in the industry.

The China Banking Regulatory Commission (CBRC) said late on Saturday that its priorities included increasing supervision over shadow banking and interbank activities.

“Banking shareholder management, corporate governance and risk control mechanisms are still relatively weak, and root causes creating market chaos have not fundamentally changed,” it said in a statement.

“Bringing the banking sector under control will be long-term, arduous and complex.”

Violations in corporate governance, property loans and disposal of non-performing assets would be punished more strictly, the regulator said, adding that it would also strengthen risk control in interbank activities, financial products and off-balance sheet business.

China shuts loophole on non-standard credit to property and infrastructure sectors

China has repeatedly vowed to clean up disorder in its banking system.

In recent months, regulators have introduced a series of measures aimed at controlling risk and leverage in the financial system, with everything from lending practices to shadow banking under the microscope.

Already in January, the CBRC has published regulations that put limits on the number of commercial banks that single investors can have major holdings in.

Financial risk the ‘critical battle’ for Xi Jinping in next three years

Chinese President Xi Jinping said earlier that financial security was vital to national security.

The government is particularly concerned about the massive shadow banking industry, lending conducted outside the regulated formal banking system.

It fears that a big default or series of loan losses could cascade through the world’s second-biggest economy, leading to a sudden halt in bank lending.