CBRC tells banks to set up stronger con­trols on risks

China Daily (Hong Kong) - - BUSINESS - By CHEN YINGQUN in Tian­jin cheny­ingqun@chi­nadaily.com.cn

The joint-stock com­mer­cial banks in China should es­tab­lish rigid con­trols and prevent fur­ther growth of credit risks, said Shang Fulin, chair­man of the China Bank­ing Reg­u­la­tory Com­mis­sion.

“We need to ex­am­ine thor­oughly the fi­nanc­ing sit­u­a­tion of the ‘zom­bie com­pa­nies’ and ac­cel­er­ate the dis­posal of non­per­form­ing loans,” he said dur­ing a key­note speech to lead­ers of the 12 na­tional joint­stock com­mer­cial banks at the 2016 An­nual Con­fer­ence of Na­tional Joint-stock Com­mer­cial Banks in Tian­jin on Mon­day.

Fig­ures from the CBRC show that the NPL bal­ance of Chi­nese joint-stock com­mer­cial banks in the 3rd quar­ter of 2016 reached 317 bil­lion yuan ($45.95 bil­lion), up about 7 per­cent from the 2nd quar­ter. The NPL ra­tio in the 3rd quar­ter was 1.67 per­cent, while that in the pre­vi­ous quar­ter was 1.63 per­cent.

Shang said that the banks should firmly main­tain de­pos­i­tors’ rights and prevent bad loans. They should also put non­credit busi­nesses, such as notes fi­nanc­ing and bond in­vest­ing, un­der a uni­fied credit grant­ing and risk man­age­ment sys­tem. This will help them truly as­sess risks and main­tain con­trol over such prob­lems as bor­row­ers hav­ing too much lever­age.

Pan Guang­wei, ex­ec­u­tive vice-pres­i­dent of the China Bank­ing As­so­ci­a­tion, said that the as­so­ci­a­tion has launched cam­paigns against es­cap­ing and re­vok­ing bank debts. So far, they have col­lected more than 120 cases and ex­posed more than 730 or­ga­ni­za­tions that have es­caped or re­voked bank debts.

Shang said that joint-stock com­mer­cial banks should put risk pre­ven­tion and con­trol higher on their agenda in the fu­ture.

“The reg­u­la­tion of the bank­ing in­dus­try glob­ally will be stricter, and the cost of vi­o­lat­ing the reg­u­la­tions will be much higher, so joint-stock com­mer­cial banks should do their ut­most to abide by the reg­u­la­tions,” he said.

num­ber of or­ga­ni­za­tions ex­posed that have es­caped or re­voked bank debts

While mak­ing in­no­va­tions in their busi­ness, they need to make sure these changes sup­port the real econ­omy, are help­ful for risk man­age­ment, and pro­tect the legal rights of de­pos­i­tors, he said.

Shang also called on banks to prevent and con­trol fi­nan­cial risks that may oc­cur in busi­nesses that are cross-in­dus­try and cross-mar­ket.

More­over, the joint-stock com­mer­cial banks should also prevent and con­trol their liq­uid­ity risks. They need to cal­cu­late how var­i­ous fi­nan­cial prod­ucts im­pact their cash flow. By con­trol­ling the du­ra­tion of their loan port­fo­lios and in­creas­ing liq­uid re­serves, they can be pre­pared to face a chang­ing fi­nan­cial en­vi­ron­ment, he said.

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