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China Banking Regulator to Promote Reform, Prevent Risks

The head of China’s banking regulator Shang Fulin said the country needs to promote banking reform and guard against systemic risks in the financial system this year.

The government will focus on potential credit and liquidity risks in 2012 and prevent the spreading of off-balance sheet risk, the China Banking Regulatory Commission chairman said, according to a notice of his remarks posted on the regulator’s website.

“China’s banking environment will become more complex and more competitive,” it quoted him as saying. “There will also be stricter requirements of banking services from society and the regulatory task will be more difficult.”

Chinese banks’ valuations fell last year below the level reached during the 2008-2009 global financial crisis on concern that loans may sour. The International Monetary Fund called for China to expand oversight of banks as risks increase from off-balance sheet lending and a surge in property prices, it said in its first formal evaluation of the Chinese system in November.

State-run Central Huijin Investment Ltd., set up to hold the government’s stakes in banks, bought more shares in Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. to bolster support, according to statements from the two lenders Jan. 5.

China should increase its reform of policy banks, its postal savings bank, rural credit cooperatives and asset management companies, Shang said. Beijing-based China Development Bank, one of the nation’s three policy banks, became a shareholding company in December 2008.

Banks should increase their support to strategic industries such as renewable energy, technological innovation, modern services and cultural businesses, he said. They should also help traditional industries to upgrade as well as guide the restructuring of export industries, Shang said.

Shang replaced Liu Mingkang as head of the banking commission in October. Liu tightened capital requirements and clamped down on off-balance sheet assets last year.

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