China's banking regulator said it would soon carry out on-the-spot checks on the accuracy of loan classifications.

The China Banking Regulatory Commission said it would check loans at 10 commercial banks that had diverse shareholdings.

They included Bank of Communications, in which HSBC Holdings Plc. owns a one-fifth stake and which was widely expected to list in Hong Kong this year, and China Merchants Bank, the commission said on its Web site.

The move was aimed at "promoting and strengthening credit risk management and boosting the quality of assets," it said.

The spot checks come as China tries to clean up a banking sector bogged down by bad loans, which pose a threat to economic stability.

The commission has been trying to implement a five-category loan classification system. A key aim is to minimize any new bad debt.

China has been trying to improve risk controls and corporate governance at its banks, many of which are looking for tie-ups with overseas banks and listings as part of wider efforts to become sound entities capable of taking on growing competition from foreigners.

The commission said it would involve 38 more city commercial banks in a pilot scheme aimed at improving information disclosure, including more comprehensive annual reports. Thirty-two such banks are already in the scheme.

Source: Shenzhen Daily-Agencies