China’s new banking fixer vows to curb risks

China’s newly appointed banking regulator vowed to strengthen supervision of the lending sector, underscoring Beijing’s determination to fend off financial risks and push reforms this year. “We will put the prevention of financial risks at a more prominent position to make sure there won’t be a systematic financial crisis,” Guo Shuqing, making his first public appearance as chairman of the China Banking Regulatory Commission (CBRC), told scores of reporters packed into a briefing room.
The 60-year-old Guo, in his third day on the job, said he is determined to remove “chaos” from the regulatory system to “safeguard” the health of China’s 232 trillion yuan (27.5 trillion pounds) banking sector for “the country and the people”. “Different regulators, different laws, different rules have caused some chaos,” Guo said, adding that CBRC is collaborating with other regulators to create a framework to close loopholes in rules for cross-market financial products.
Guo also said CBRC will curb the expansion of banks’ off-balance sheet business and tighten oversight of their nearly 30 trillion yuan in wealth management products (WMPs).
Over the past five years, China’s banking assets have more than doubled, even as the economy has slowed, as debt-fuelled stimulus brought an explosive growth of debt. Non-performing loans at commercial banks totalled 1.51 trillion yuan at the end of last year, the highest since 2005. Risk prevention is expected to be a key theme at a meeting of China’s parliament starting today.
Guo’s comments come a day after President Xi Jinping told top policymakers that China must “unswervingly” crack down on financial irregularities and illegal behaviour, while improving its market supervision.
The regulator addressed questions related to the rapid asset deterioration at commercial lenders and increased risk associated with a potential housing bubble.
Prices of new homes jumped 12.4 per cent last year, the fastest rate since 2011. Since October, more than 20 cities have introduced property curbs to cool the market.
Mortgage lending accounted for about a quarter of bank credit and nearly half of last year’s new loans, Guo said.
Guo warned banks to “prudently” manage loans to property developers.
“We pay close attention to the risk of a real estate bubble,” he said, adding that while the leverage ratio of mortgage loans is not too high, rapid mortgage growth is a concern.
The CBRC will restrict lending it suspects is being used for property speculation, Guo said.
Asked what role he’ll play in China’s expected financial regulatory system reform, Guo said he didn’t yet have a chance to think about it and shifted the topic to his just-ended years as governor of the eastern province of Shandong. “Until last week I was thinking about my work in Shandong,” Guo said. — Reuters