Regulator warns China's banks to remain vigilant

BLOOMBERG

Mon, Apr 23, 2007 - Page 10

China's banks must stay vigilant in assessing borrowing applications and prevent a resurgence of non-performing loans, the nation's banking regulator said.

China's banks must keep loans growth steady and extend support to rural and small-sized enterprises, Liu Mingkang (劉明康), chairman of the China Banking Regulatory Commission, said in a statement yesterday on the agency's Web site.

The People's Bank of China has ordered banks to set aside more money as reserves six times in less than a year to remove funds from the financial system as foreign exchange reserves surged to US$1.2 trillion. New yuan lending jumped 41 percent last year, exceeding a central bank target.

"Banks mustn't waver from the determination to curb new non-performing loans," Liu said. "Banks must keep a close watch out for the risks that may arise from accelerated growth in medium and long-term loans."

China's economy expanded 11.1 percent in the first quarter, driven by a trade surplus that almost doubled to US$46.4 billion, the statistics bureau said last Thursday.

Growth in lending has not cooled, with banks making 1.4 trillion yuan (US$181 billion) of new loans in the first quarter, nearly half the total for last year, the statistics bureau said.

Listed banks that don't meet an 8 percent capital adequacy ratio requirement are banned from giving dividends, Liu said.