“Strong Regulation, Strong Accountability” Set to Be New Normal for Chinese Banks

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As Beijing pushes through with supply-side structural reforms, China’s banking authorities are seeking to make “strong regulation, strong accountability” (强监管,抢问责) the new normal for the lending sector in 2017.

Yang Jiacai, assistant chairman of the China Banking Regulatory Commission (CBRC) flagged the launch of a slew of new risk-control measures for the financial sector in order to safeguard the success economic reforms.

The banking sector will be at the very forefront of financial risk prevention in 2017, with CBRC anointing it the year of “strong regulation, strong accountability.”

To this end CBRC plans to formulate and successively introduce a total of 7 major action plans in the near term.

Specific areas of focus for risk prevention and control will be:

  1. Non-performing loans;
  2. Liquidity risk;
  3. Cross-market financial risk;
  4. Lending risk in relation to the financial platforms of local governments;
  5. Online financing risk;
  6. Risk in relation to illegal fund raising;
  7. External shock risk.

Yang also said that regulators would give greater attention to share investors and the need to ensure that capital contributions are paid in.

“When equity purchases are made, we will inspect their qualifications, motivations and fund sources,” said Yang.

Regulators Crack Down on Infractions in Q1

CBRC has already launched a crack down on malfeasance in the banking sector during the first quarter of this year.

During the first three months of 2017 Chinese banking regulators issued a total of 485 administrative penalties to the lending sector, including a total of 190 million yuan in forfeitures and the issuance of fines to 197 individuals.

Regulators also cancelled the professional qualifications of a total of 19 senior executives, and banned a 11 people from engaging in further work in the banking sector.

“Administrative penalties are a key regulatory power and responsibility conferred upon the banking regulator and its branches by law,” said CBRC legal department chair Liu Fushou. “We constantly maintain high pressure to correct financial malfeasance, and have struck a heavy below with the investigation of a raft of illegal cases.”

General Areas of Focus for Regulators

According to Yang the three key foci of financial risk prevention measures by Chinese regulators will be:

1) Addressing regulatory inadequacies, particularly regulation of shareholders, and promptly updating regulatory systems;

2) Launching specialist campaigns to address market malfeasance and having the “courage to bare our swords” and “lift the lids”;

3) Achieve optimisation of the coordination effects between banking sector regulatory policy, monetary policy, finance policy and industry policy.

 

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