Chinese banks should make use of the financial crisis to improve their risk management and efficiency, said a report yesterday.

The banking industry in China is weathering the impact from the changing macro-economic landscape as the financial crisis is spreading into the global real economy, said Xinhua Finance Ltd in a report yesterday.

Domestic banks are witnessing a slowdown in credit growth and a trend for asset deterioration. The impact from the manufacturing and real estate sectors, which account for a big proportion of loans, is especially worrying.

The government's recent fiscal policy and easing monetary stance will help the domestic banking industry, market observers said. However, as the economic restructuring is a long-term process and it takes time for the policies to take effect, banks should strictly comply with risk management standards to avoid new bad loans, the report said.

The China Banking Regulatory Commission has already asked banks to strengthen risk management during the current situation even though the Chinese banking industry is relatively untouched by the financial crisis due to its limited overseas investment.

The People's Bank of China, the central bank, has cut interest rates three times in six weeks. Banks are facing narrowing interest spread after the reductions and are under pressure to broaden their fee-based income and improve profitability, the report pointed out.

(Shanghai Daily November 20, 2008)