China to launch risk rating for joint-stock banks

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Last updated at: (Beijing Time) Monday, February 23, 2004

China to launch risk rating for joint-stock banks

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China's banking watchdog has launched the country's first risk rating system targeting the country's joint-stock banks, numbering 11 so far, in a move to tighten supervision and propel the banks to improve competitiveness.

The China Banking Regulatory Commission (CBRC) said Monday it could confine the business scope of or even take over the banks with "poor results" in the rating.

The rating would cover the banks' capital adequacy, asset safety, management, profits, liquidity and sensitivity to market risks, said a spokesman for the commission.

China's joint-stock banks will then be divided into five categories in line with the rating results, ranging from "sound" to "poor".

The spokesman said the rating, as an annual practice by the CBRC, would be an important criterion for considering a joint-stock bank's market access and appointments of senior staff.

He said the regulator would decide when to publicize the rating results.

The CBRC plans to organize frequent and wide-ranging spot examinations for banks with low ratings, among other efforts to urge them to upgrade, said the spokesman.

Experts note the new rating system would be a sustained push for joint-stock banks to enhance corporate governance and improve internal controls in a bid to "grow stronger".

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