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The guidelines take effect on Dec. 11, the day on which Tang Shuangning, vice chairman of the China Banking Regulatory Commission (CBRC), told a press conference on Wednesday that the guidelines are the first general document issued by According to Tang, domestic banks lag behind foreign banks in financial innovation and the CBRC wants to encourage them to spread their wings. He said non-interest income generally accounts for over 50 percent of the total revenue of major world banks, but the highest rate in Tang said The CBRC will set up a legal environment that allows both Chinese and foreign invested banks to launch new financial services. Improving the risk-control capability of commercial banks is another emphasis of the guide, he said. The guide clarifies the obligations of commercial banks to consumers, including fair and correct disclosure of information, professional counseling services and an effective consumer complaint system. The guide also requires commercial banks to fully inform consumers of the risks of investing in financial products. According to Tang, the CBRC has issued a series of rules concerning derivatives trading, electronic banking services and financial consultation for individuals. 62 commercial banks are authorized to trade derivatives in Tang also said that the government will adopt a tolerant attitude towards risks caused by financial innovations. "We can not blame the pioneers in financial innovations as the Chinese banks do not have many experiences in the area," he said. The official said they would be tolerant for indeliberately caused risks, but concerned regulations would be improved. Chinese banks used to rely on interest rate difference to make profits. After Chinese residents, who are getting richer, are no longer satisfied with the simple saving and loan services in the banks. There is a demand for financial innovations, he said. The official also said that a mechanism would be developed to relieve commercial banks of risks in launching new financial services. "The ceiling has not been in place for long and it well adapts to the current situation of the Chinese banking industry, so we will keep the policy stable for a period," Tang said. To support the opening-up of the banking sector, Tang said the measures have helped bring in strategic investors, conduct the stock-holding reform and improve the corporate governance of Chinese banks. It has also proven to be effective in strengthening supervision over and preventing risks of Chinese lenders, he said.
Commercial Banks May Be Allowed to Set up Insurance Companies The China Banking Regulatory Commission (CBRC) is deliberating upon the feasibility and prospect of allowing commercial banks to establish insurance companies, told the press conference. He confirmed that the Bank of Communications and China Construction Bank have each applied to the commission, hoping to establish an insurance company each. "We are talking with relevant departments now. I believe the business will bring about positive fruits," he said. He said that a regular communication mechanism has been established between the commission and the country's insurance industry watchdog, the China Insurance Regulatory Commission. Tang also disclosed that the commission would hammer out quantitative indices to help classify behaviors that fall into the category of forbidden unfair competition such as low-price dumping and vicious competition.
(Xinhua News Agency December 6, 2006)
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