PBOC increases control over banking system
asia1.com.sg
Central bank also shuts down branches; moves seen partly as response to Asian crisis
C
HINA's central bank has decided to step up the supervision of the banking system and shut down its own provincial branches to increase central control, the official Xinhua news agency said yesterday.
The moves were attributed partly to the Asian financial crisis which has crushed several regional currencies and stock markets since erupting in July.
"Although the South-east Asian financial crisis does not seem to pose a direct threat to China, the hidden dangers that led to the crisis also exist to some degree in China's financial sector, and the central bank has taken heed and decided to further increase financial controls," the report said.
As part of its plan, the central bank, the People's Bank of China (PBOC), will gradually close its roughly 30 provincial branches, and instead set up a smaller number of regional branches, to strengthen the central bank's control over its branches.
The move is expected to diminish the influence of provincial level government officials in bank lending. It is partly aimed at giving commercial banks a freer hand in determining who they lend to, based on credit considerations.
The official news agency said the move represents Chinese authorities' determination to push ahead with national economic reforms, including financial sector reforms. "The ultimate goal of the new round of reforms is a modern financial system and a sound financial order over the next three years," Xinhua said.
The central bank will draw on the experience of other international central banks, as it tries to increase its authority and independence from political considerations, and become more professional and sophisticated, the agency said.
China will also press ahead with plans to shut down local branches of state-owned commercial banks that are not performing well, the agency said.
As part of its ongoing attempt to improve the creditworthiness of commercial banks' borrowers, China will develop a new system of classifying loans, in line with international standards.
It will seek to create "a modern banking system established with boards of directors, and internal control systems", the agency reported.
The country will also try to establish its own mutual funds to channel individual savings into those enterprises "with a good record", Xinhua said.
China will continue to gradually press ahead with plans to make its currency, the yuan, convertible under the capital account, despite the Asian financial crisis, the agency pledged. -- AFP |
