Bank regulator issues risk directive

China's banking regulator has again told banks to improve their management of loan risks, days after announcing plans to investigate lending by some commercial banks.

The China Banking Regulatory Commission (CBRC), which is working to overhaul a sector seen as a chief weakness in the economy, said Sunday it had issued a 13-point circular to banks on how to control lending risks better.

Instructions in the circular included measures like strengthening internal checks and ensuring that employees did not gamble or take drugs.

The CBRC ordered lenders to declare which managers were responsible for supervision of accounts, loans and other finances.

The country's four biggest State banks and 11 stock-holding lenders must clarify the responsibilities of different positions and report irregularities earlier, it said.

Other points instructed banks to strengthen supervision of branch offices, make management more transparent and keep seals and codes secure. The commission also demanded better computer systems for detecting wrongdoing and risks.

"The weak ability to handle risk in bank operations has become increasingly prominent in the development of the banking sector," the commission said.

"For example, in some banks there are inadequate rules, no proper supervision of the implementation of those rules, lenient punishment for violations, weak management and poor internal controls, all of which lead to major problems."

The circular was dated March 22 and was published Sunday in a statement on the commission's Web site.

The government is pushing banks to reorganize, improve management and write down bad loans in preparation for increased foreign competition. China will lift restrictions on overseas banks at the end of 2006 to meet commitments made on joining the World Trade Organization in 2001.

Source: Shenzhen Daily/Agencies