Malpractice found in forex management
By Chuan Yu (China Daily)
Updated: 2004-08-13 08:31

China's foreign exchange regulator said yesterday it had found forex business irregularities at certain insurance companies in a recent inspection, but compliance was believed good overall.

The State Administration of Foreign Exchange (SAFE) conducted compliance inspections into five insurance companies earlier this year on their forex business of last year. SAFE said the inspections aimed to facilitate supervision of insurance companies' forex business and analyze "new situations and new problems" in the area.

The five insurers' compliance performance was "good overall, but practices that contrary to forex management were found," it said.

Some insurers wrote forex-denominated policies for unqualified clients or uninsurable risks, the administration said.

SAFE found problems of currency mismatch between premiums collected and compensations, and also some insurers were found accepting forex cash premiums, which is not allowed.

Forex business at Chinese insurers has been growing in recent years as market liberalization continues, prompting regulators to issue a regulation late in 2002 to better regulate the area.

With their forex holdings growing fast, Chinese authorities have been considering allowing insurers to invest in overseas capital markets in order to help them improve yields.

Chinese insurance companies have long faced the problem of limited investment channels. The problem is more serious in forex business, given the nation's tight forex controls.

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