Regulator issues directives on bank risks
(Agencies)
Updated: 2005-03-28 12:07

China's banking regulator has again told banks to improve their management of loan risks, days after announcing plans to investigate lending by some commercial banks.

The China Banking Regulatory Commission, which is working to overhaul a sector seen as a chief weakness in the economy, said on Sunday that it had issued a 13-point circular to banks on how to control lending risks better.

Instructions in the circular included measures like strengthening internal checks and ensuring that employees did not gamble or take drugs. Other points instructed banks to strengthen supervision of branch offices, make management more transparent and keep seals and codes secure. The commission also demanded better computer systems for detecting wrongdoing and risks.

"The weak ability to handle risk in bank operations has become increasingly prominent in the development of the banking sector," the commission said. "For example, in some banks there are inadequate rules, no proper supervision of the implementation of those rules, lenient punishment for violations, weak management and poor internal controls, all of which lead to major problems."

Banks have suffered "huge losses" due to "frequent and major fraudulent cases" and a failure to detect employee misconduct, said the order from by the China Banking Regulatory Commission.

The circular is dated March 22 and was published Sunday in a statement on the commission's Web site.

China's banking system is struggling with bad debts and widespread fraud; nonperforming loans exceed $200 billion.

The former chairman of China Construction Bank, Zhang Enzhao, quit this month, citing "personal reasons," amid corruption accusations. In a case reported by the official Xinhua news agency, a Bank of China data typist was arrested this month for embezzling $6 million.

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