China is demanding detailed financial statements from its mid-tier banks rather than standard balance sheets in a bid to pre-empt risky lending practices.
A China Minsheng Banking Corp executive yesterday said a China Banking Regulatory Commission notice outlining 'off-site' bank examinations meant banks would need to periodically give the regulator comprehensive details about banking operations.
Before yesterday's notice, the 11 shareholding commercial banks were required to produce only simple financial statements. In addition to more comprehensive statements, banks were now expected to produce reports specifying the performance of risk-management regimes, internal controls and corporate governance mechanisms, the executive said.
Barclays Capital's Asia-Pacific analyst Arthur Lau said China's moves towards greater transparency were in line with international standards. 'With balance sheets, you can only see garbage in and garbage out,' Mr Lau said. 'But with separate reports, the regulator will be able to have a better idea of the banks' credit data, business portfolios and off-balance-sheet items over a certain period.'
The 11 shareholding commercial banks are of prime concern to top leaders because they have been registering loan growth of more than 30 per cent year on year.
Much of this lending has been in questionable projects in the most overheated sectors: steel, aluminium, cement, cars and property.
