Rules focus on banking supervision By Zhang Dingmin (China Daily) Updated: 2004-04-07 08:41
The China Banking Regulatory Commission (CBRC) yesterday promulgated rules
governing transactions between commercial banks and affiliated parties.
The new rules, which will take effect on May 1, are a further step by the
banking watchdog to tighten the supervision of Chinese banking institutions,
many of which are undergoing restructuring.
Such affiliated transactions had led to considerable losses for commercial
banks and were a major cause of the massive non-performing loans problem in the
banking sector, the commission said.
"Huge risks are hidden in unfair affiliated transactions between commercial
banks and their affiliated parties, which seriously undermine the safe and
stable functioning of commercial banks," a CBRC spokesperson said.
Non-performing loans accounted for 17.8 per cent of total lending by major
Chinese financial institutions, or the State-owned commercial banks, policy
banks and joint-stock commercial banks, at the end of last year, official
statistics indicated.
The new rules give a detailed definition of "affiliated transactions"
and list the different types of transactions. Affiliated parties typically
include shareholders and senior bank management.
Under the new rules, banks are explicitly forbidden to extend unsecured loans
to affiliated parties, grant loans collateralized by shares from the lender
itself, or provide guarantees for financing activities by affiliated
parties.
