Banking News
- Hidden problems plague banks in boom
Date: 20-Apr-2007 Sources: (Shenzhen Daily)
THE country's economic boom is casting a veil over problems faced by many banks, which need to avert future bad loans by better managing risks, a top regulatory official said in remarks published Thursday.
Domestic lenders had largely purged themselves of legacy nonperforming loans with the aid of bailouts by the State and needed to focus on improving their operations, said Tang Shuangning, vice chairman of the China Banking Regulatory Commission.
'Financial risks, mainly in the form of bad loans, are like rocks on the seashore. They aren't visible when the economic wave is high but appear when the wave withdraws,'Tang said in a speech posted on the commission's Web site.
The government should highlight the financial problems still facing the banking system at a time when the country's economy had maintained double-digit growth for four years in a row, he said.
Domestic banks still need to improve in a range of areas, including management, the competency of their staff and internal controls, he said.
Small financial institutions located in rural regions suffered the most pressing problems in the face of increasing market competition, he said.
Analysts have worried that many of the loans that have helped finance China's investment frenzy over the past few years will turn sour if the economy slows down.
In another development, the investment arm of the central bank will inject fresh capital into China Development Bank in the coming months as part of a program to transform the policy lender into a commercial entity, the China Business News reported.
Central Huijin would use an undecided amount of the nation's foreign exchange reserves to recapitalize the bank, one of three policy banks.
The government unveiled plans in mid-January to make China Development Bank the first of the three banks to be commercialized, as part of sweeping reforms to the country's banking sector.
The government tapped its stash of foreign exchange reserves, now the world's largest at over US$1.2 trillion, to pump US$22.5 billion into Bank of China, US$22.5 billion into China Construction Bank and US$15 billion into Industrial and Commercial Bank of China.
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