Closer watch on non-bank financial bodies
By Zhang Dingmin (China Daily)
Updated: 2004-04-16 08:41

The China Banking Regulatory Commission (CBRC) yesterday vowed to strengthen supervision of the nation's non-bank financial institutions this year.

The commission said it aims to help the institutions improve corporate governance mechanisms and raise risk management levels by using a series of enhanced supervisory measures.

The non-bank financial institutions supervised by the CBRC - trust companies, financial leasing companies and financial firms owned by conglomerates - witnessed rapid growth last year as the end of government-led consolidations approached, triggered by scandals in the 1990s. The institutions' combined assets stood at 825 billion yuan (US$99 billion) at the end of last year, a year-on-year increase of 25 per cent, with bad assets accounting for 4.7 per cent of the total, compared to around 20 per cent among commercial banks.

The institutions' profits were a meagre 5.7 billion yuan (US$686 million) in 2003, up 42 per cent from the previous year.

Chaos ensued in China's fledgling financial leasing industry in the 1990s from a combination of overexpansion, a lack of regulatory rules and massive rent arrears.

The People's Bank of China, subsequently enforced a regulation in 2000, which forced the 12 financial leasing companies into a painful restructuring process in order to meet the tightened 500 million yuan (US$50 million) registered capital threshold. Most of them have so far completed this restructuring by ushering in private capital and large State-owned companies, earlier reports said.

In a further move to contain non-bank financial institutions' risks, some trust companies were shut down and liquidated last year, following a similar consolidaiton period in the 1990s.

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