China needs financial institutions with comprehensive financial
businesses in its post-WTO period, Tang Shuangning, vice chairman
of China Banking Regulatory Commission, told the Sixth China
Finance Forum, held last Saturday in Beijing.
"Foreign banks, with rich experiences, excellent service and
management, impose huge impacts and challenges on domestic banks:
new technologies, new financial products, profit-earning model,
management system, structure, concept, regulatory mechanism and
thinking," he said.
"Divisional financial institutions now face mixed industrial
sectors, so institutions with mixed businesses are needed," he
said. "As the transitional period of WTO comes to an end this year,
it becomes urgent for China's commercial banks to explore
multi-level and diversified forms of comprehensive operations."
However, Tang warned that mixed operations will bring
contingency risks such as affiliated transactions, information
disclosure and conflicts of interest along with credit, operational
and market risk.
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He said that CBRC will urge banks to set up firewall systems
according to the principle of "different legal representatives in
different sectors," enabling the prevention of internal risks. Full
information disclosure will also be required, preventing shared
information among sub-companies causing internal transaction risks
and monitoring of banks' capital adequacy ratio will be set up.
Statistics show that over 50 countries around the world allow
banks to run securities brokerage businesses, and 30 of these allow
banks to double up as insurance businesses. In China, some banks
now attempt to set up financial groups, fund management companies
or insurance companies in order to dabble in mixed financial
operations.
"The average fund, raised by fund management firms of the
Industrial and Commercial Bank of China, China Construction Bank
(CCB) and Bank of Communications, is about 5.114 billion yuan
(US$646.5 million), far surpassing the issuance scale of other
companies," Tang pointed out.
Currently, the three above firms manage a total of eight
investment security funds, worth over 30 billion yuan (US$3.79
billion).
In 2005, China Development Bank and CCB conducted an
assets-backed securitization pilot program. They issued 10 billion
yuan (US$1.26 billion) worth of secured bonds backed by corporation
loans and 3.016 billion yuan (US$381.26 million) worth of bonds
backed by personal mortgage loans.
Tang believes that his commission will emphasize five aspects of
regulation: strengthen commercial banks' risk-resistance ability,
control risk management of commercial bank's overseas financing
businesses and IT technology, improve trans-industry risk
management and enhance supervision on assets-backed securitization
businesses.
(China.org.cn by Tang Fuchun, September 28, 2006)