China is reviewing a series of laws and regulations to tighten supervision of financial institutions and guard against financial risks, senior government officials said Thursday.

Addressing a financial forum at the Chinese Academy of Social Sciences (CASS), Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said the CBRC is cooperating with other related departments in submitting suggestions to lawmakers on how to fine-tune Criminal Law provisions on financial or white-collar crime.

The financial services industry has undergone tremendous change in recent years, and the provisions should be updated to keep up with the industry's development, Liu said.

"We find some articles in the current law too general. Detailed judicial explanations on specific articles are essential to make it easier and more practical to convict financial criminals," he said.

New provisions should also be added to deal with new infringements such as cheating on bank loans and malpractice in the disposal of NPLs (non-performing loans).

Liu said updating the law is a matter of urgency, particularly at a time when financial institutions are faced with severe challenges when trying to reduce risks.

Also in the process of being upgraded are a revision of punishments in matters of financial malpractice and the nation's bankruptcy law.

Administrative punishment regulations, which were promulgated in 1999, should be modified.

Meanwhile, "enough protection should be given to banks that lend where bankrupted enterprises are involved," Liu added.

Wang Guogang, vice director of the Institute of Finance and Banking with the CASS, said that one of the great shifts in China's society is that where people used to see financial institutions as an independent sector like steel and cement, they now find they are closely linked with society as a whole.

"It is essential to have a comprehensive look at the legal system where financial institutions are concerned," Wang said.

General laws and regulations, experts said at the forum, are already in place for financial institutions to follow. But there are few detailed explanations on the specific rules. There is also a lack of enforcement measures.

"It's like you make a rule that people have to come to the office before 8 every morning, but you don't have a rule punishing people who come after 8. So, what if people do come late?" said Huang Yi, an official with the legal department of the CBRC.

Liu said that in China, compliance with rules is often stressed, but rules are practically irrelevant if there are no clear enforcement measures.

Liu said the CBRC had issued 127 rules and regulations on banks' risk control by the end of April.

Among them, 22 cover credit risks, six cover market risks, 12 cover operational risks and 23 cover comprehensive risks.

The banking regulator has also ordered the nation's lenders to enforce internal controls and improve risk management. It has in addition pledged further scrutiny on bank fraud after a series of recent banking scandals.

Banks have also been alerted to potential credit and solvency risks and they have been urged to improve transparency and information disclosure procedures.

"Disclosure is a bit contrary to Chinese tradition as Chinese people think personal circumstances should not be made public," Liu highlighted.

"But it is good for the banks' investors and the public since they entrust their money to the banks. Transparency is actually the lifeline for banks."

(China Daily June 17, 2005)