Chinese regulators highlight precautions against financial risks before Seoul Summit _Focus on China--China Economic Net
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Chinese regulators highlight precautions against financial risks before Seoul Summit
Last Updated(Beijing Time):2010-11-11 14:34
While Chinese banks have met some of the Basel III requirements, regulators are highlighting precautions against risks to ensure the country's financial security.

The latest preventive measure was a 50-basis-point hike of the deposit reserve requirement ratio for Chinese deposit-taking financial institutions as of Nov.16. It was announced Wednesday evening.

At the Seoul Summit, which begins Thursday, the G20 leaders were expected to discuss the Basel III bank capital rules, which require banks to hold more core capital in an attempt to prevent a repeat of the global credit crisis.

"The global economic and financial systems are becoming increasingly unstable and uncertain. We should not neglect their influences on foreign demand and capital flows," said Liu Mingkang, chairman of China Banking Regulatory Commission (CBRC), at the latest conference on the country's economic and financial situation.

At a time when both global economic recovery and domestic economic restructuring are arduous, the banking industry still faces great risks. Banks should be clear about the situation and make relentless efforts to manage risks, Liu said.

The third-quarter reports of China's Big Four showed these large state-owned banks grew rapidly on traditional lending business -- their major source of profits. Also, their non-performing loans ratio continued to fall and provision coverage ratios remained relatively high.

Since the 1990s, state-owned commercial banks have stripped non-performing assets, received government capital injections, finished restructuring and shareholding reforms and finally realized public offerings.

Thanks to effective preventive measures taken by the authorities, Chinese commercial banks recovered from "technical insolvency", as labeled by some foreign media, and have been growing vigorously.

By the end of 2006, the deadline for the four asset management companies (AMCs) to work out all non-performing loans of state-owned banks, the AMCs had resolved 1.21 trillion yuan (175 billion U.S. dollars) of state-guaranteed bad assets and reclaimed 211 billion yuan in cash, 28.6 billion more than the target set by the government.

Starting in 2005, China's commercial banks had two rounds of intensive capital replenishment. The first round was their public offerings and the second was an array of injections from state enterprises in recent years with a view towards tackling their fast credit growth.

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