August 25, 2003 (South China Morning Post)
Draft law would greatly amend supervision policies and focus on reducing bad debt loads
The bank supervision draft law, the
first of its kind in
China Banking Regulatory Commission (CBRC) chairman Liu Mingkang said that under the law the commission would establish guidelines to exercise cross-border supervision together with bank watchdogs of other countries and regions.
It would also set up effective guidelines to minimise financial risks for commercial banks, Xinhua reported.
Under the draft law, the CBRC is authorised to oversee all banks and financial institutions
Since the CBRC was founded on April 28, it has carried out a series of measures to control banking risks, including investigating the non-credit operations of the four state-owned commercial banks.
It has announced that all domestic banks, both state-owned and joint-stock ones, are required to adopt the commonly accepted rules to sort loans into five grades, from best to worst, next year.
Despite its efforts to impose more
stringent risk control standards on
The CBRC has also reportedly met considerable resistance at the central bank, which has seen its once immense powers over the financial sector gradually reduced to leave it now in charge of just monetary policy.
According to Xinhua,
Experts have noted there is only a short time left for the country to deal with the problem loans before foreign banks enter the market.
Amendments to the Law on Commercial Banks were also being considered, Xinhua said.
Being independent, profit-seeking businesses, state-owned commercial banks will no longer be required to grant policy-orientated loans at the request of the government, according to the draft amendment.
At present, state-owned commercial banks receive compensation from the State Council if losses result from the policy-orientated loans.
The new draft law loosened the limits on investments by commercial banks, in a bid to meet the needs of the rapidly growing sector, said Mr Liu, formerly the president of Bank of China.
The present law bans commercial banks from investing in non-financial institutions or enterprises, or running securities or credit businesses.
Another amendment draft, of the Law on the People's Bank of China, recommends that the central bank's currency policy committee play a more crucial role in steering the mainland's macro-economy.
It deletes items concerning the central bank's supervision and regulation of banks and financial institutions, as this is now handled by the CBRC.
The measures will be debated from Friday by the National People's Congress Standing Committee.