China Is Picking Up Oversight Of Banking

The China Banking Regulatory Commission (CBRC) announced this past weekend that it is focusing on boosting oversight of banking and interbank activities.

According to a report in Reuters, the Chinese regulator said that any violations related to property loans, corporate governance or disposal of poorly performing assets will face more stringent punishments. The CBRC also said it is gearing up to enact stronger risk controls for financial products, interbank activities and off-balance sheet business.

“Banking shareholder management, corporate governance and risk control mechanisms are still relatively weak, and root causes creating market chaos have not fundamentally changed,” the CBRC said. “Bringing the banking sector under control will be long-term, arduous and complex.”

China has long mentioned its intention to expand regulations on the banking system, but in recent months it has been making moves. The government recently introduced measures aimed at controlling more risk and leverage in China’s financial system, looking closely at shadow banking, lending procedures and other finance practices.

In January, the banking regulator in China placed a limit on the number of commercial banks in which a single investor can have a big stake, reported Reuters. President Xi Jinping has also said the country’s financial security is vital to national security. In December, Chinese government regulators distributed new rules to local governments, targeting the fast-growing online micro-lending industry.

According to a recent news report from Reuters, the new rules forbid unlicensed organizations and individuals from conducting lending businesses. Lending institutions are also not permitted to grant loans to consumers who do not earn an income, nor can they trick consumers into borrowing more than they can afford.

Beijing is specifically focusing on the loosely regulated market for issuing small, unsecured cash loans via mobile apps, which have been criticized for their unethical advertising campaigns and aggressive tactics of debt collection. Research firm iResearch predicts that the online cash loan sector will likely reach 2.3 trillion yuan by 2020.