China's trust companies will be obliged to disclose their financial information from this year, as the industry's watchdog pushes for increased transparency in the once chaotic trust sector.
An overhaul that started in the late 1990s is still taking place in the sector. It has already cut the number of firms from 239 in the industry's heady days to the current figure of 59.
And 30 of these, among the first batch of firms to win back their licences in the consolidation campaign, have been given an April 30 deadline to publish their financial reports, said a spokesman for the China Banking Regulatory Commission.
Other firms that obtained their licences at a later date have been given until April 30, 2008 to start making this information available to the public, he said.
The commission has already issued a set of provisional rules on the issue, requiring the firms to issue annual reports containing reports of financial assets, trust assets management accounting report, major events and data on major affiliated transactions.
In addition to annual reports, the trust companies are also required to publish immediate announcements when there are major issues affecting them.
"To regulate trust companies' information disclosure activities in a legal sense is the precondition for the further development of the industry," said the spokesman.
This information will be very helpful for customers and other parties involved to learn about the trust companies' financial situations and risk conditions, he said.
This information is crucial in the analysis and judgment of the trust companies' operations and risks, he said.
External checks will put the companies under pressure to improve their corporate governance and internal controls.
"The public's scrutiny will supplement the regulators' efforts," he said.
Trust companies mushroomed across the country in the 1980s and early 1990s. They are basically universal banks, doing everything from lending to securities underwriting. Loose corporate governance and regulation resulted in some trust companies suffering huge losses.
The government-led clear up campaign started in 1999, around the same time the Guangdong International Trust and Investment Corp, one of the biggest trust companies in the country at the time, went bankrupt.
The nation's financial authorities closed most of the trust companies, restructured the others and required them to re-register with the regulators.
The trust firms allowed to survive were required to increase their capital bases and trim non-performing assets resulting from their securities business, which they are not allowed to do now.
At the same time, the commission also worked out a new regulatory system to ensure the healthy development of the industry.
(China Daily January 19, 2005)
