China's State commercial banks and financial asset management companies needed to strengthen methods for tracing non-performing loans (NPLs), China's top banking regulator said over the weekend.

The China Banking Regulatory Commission (CBRC) said State commercial banks must put in place mechanisms for tracking loans and separate the processes to discover where in the steps violations might occur, resulting in NPLs.

The guidelines for tracing accountability and responsibility for NPLs was posted on the CBRC Web site and issued in tandem with the Ministry of Finance and the People��s Bank of China, the country��s central bank.

The guidelines also request State commercial banks and financial asset management companies work together in dealing with NPLs and said the asset management companies should seriously investigate NPLs and report irregularities they found to regulators.

Penalties should be meted out for violators, the CBRC statement said.

China has four asset management companies that were created by the government several years back specifically to handle the NPLs of the four largest State banks.

But this year, some of the asset management companies have also been requested by the government to take charge of restructuring work at cash-strapped corporates, including securities firms.

Source: Shenzhen Daily/Agencies