Banking News
- Banks' strength yet to be tested: regulator
Date: 28-Dec-2007 Sources: (Shenzhen Daily)
DOMESTIC large banks had reported impressive growth in earnings but harder times might be on the way, testing their ability to withstand a downturn, a top banking regulator cautioned yesterday.
Cai Esheng, vice chairman of the China Banking Regulatory Commission, told a financial forum in Beijing that banks should not be complacent but should prepare to face potential stumbling blocks by enhancing their risk controls and corporate governance.
'Our banks have been developing robustly and have made a lot of money, but so what??Cai said. 'There is still a question mark as to whether we can withstand challenges, present or future.'
Cai cited the subprime mortgage crisis in the United States as a warning to domestic banks that even well-established financial institutions could get into trouble.
Domestic lenders, which rely mostly on lending for their profits, could suffer once the economy turns sour, he said.
The comments reflect concerns in the government that although domestic banks have shed their debt-ridden past to become some of the world's largest by valuation, on the back of government bailouts and strong economic growth, there may be lingering problems of internal management and governance.
The country's large banks including Industrial & Commercial Bank of China, China Construction Bank Corp. and Bank of China have been warmly welcomed by investors in their public listings over the past few years.
Cai reiterated that the government was not ready to lift the ceiling on foreign ownership of its banks anytime soon.
U.S. and European financial institutions have been pressing China to lift ownership caps, hoping to better tap the growth in financial services that is accompanying China's economic boom.
Cai said raising foreign ownership caps required a law change and therefore a decision probably wouldn't happen before China's legislature, the National People's Congress, meets in March.
'The extent to which China's banking market will be open to the outside depends on how much other countries open their markets to Chinese banks,'he said, echoing earlier comments by Liu Mingkang, chairman of the China Banking Regulatory Commission, that greater openness would depend in part on the United States giving more access to Chinese banks.
Sponsor Results:
