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Home >> Business
UPDATED: 13:23, October 31, 2006
Chinese Banks facing four major risks and challenges
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At a recent briefing on the economic and financial situation of the quarter, Liu Mingkang, chairman of China Banking Regulatory Commission pointed out that Chinese banking sector now is facing four major risks and challenges: impulsive investment leads to rigid growth of long-term and medium-term loans; non-prudential loans create more credit risks; vulnerable segments of risk management are further exposed; electronic banking creates new challenges to risk management.

According to Liu, in the callback process of the current international and domestic economic growth, the problem of China's excessive liquidity and surplus of production capacity in some sectors of industries will continue and the potential risks of the banking loans invested in the process of economic growth will gradually emerge. Impulsive investment will lead to rigid growth of long-term and medium-term loans, which will increase the potential risks of the banking sector.

Along with the continuous progress of banking reform and opening up, the weak links in risk management of China's commercial banks will be further exposed. Liu Mingkang believes that the current ability of Chinese commercial banks to guard against operating risks is relatively weak. Some major cases have occurred from time to time. The market is also weak in exercising vigilance against risks. The fluctuation of interest rates, exchange rates, stock or commodities, together with the market risks in the mergers and acquisitions by commercial banks in domestic and overseas capital market have become major risks facing China's banking industry.

By People's Daily Online

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