China is setting up a new government agency to supervise and coordinate the nation's bank, insurance and stock market regulators, as it tries to improve risk controls before allowing lenders to invest in stocks and insurance funds.
China's legislators yesterday passed amendments to the central bank law allowing the State Council to set up the new government supervisory body, and to the commercial bank law, aimed at diversifying investment opportunities for its lenders, according to a statement from the standing committee of the National People's Congress and carried by state news agency Xinhua. The changes will come into effect on Feb. 1.
China has for a decade forbidden lenders from buying stocks and bonds or offering non-banking services, to prevent the risk of financial collapse through poor investment decisions. The government is tightening regulatory controls to help banks, weighed down by US$500 billion of bad loans from five decades of state-directed lending to unprofitable businesses, expand their income to compete with overseas lenders which can enter China more freely from the end of 2005.
"While limiting commercial banks from conducting trust investment and securities investment, the law should also leave appropriate room for them to develop," said Jiang Qiangui, deputy head of the legal committee of the National People's Congress, as cited by Xinhua.
The amendment to the commercial banking law may allow the country's 126 commercial banks, including Industrial & Commercial Bank of China and China Construction Bank, to invest in the stock market, trusts, real estate and other non-banking financial businesses at some point in the future.
"There are exceptions [to the ban on outside investments] upon government approval," said the revised commercial law.
Government officials and legislators have been calling for the government to lift the ban and let commercial banks diversify their business so they can generate more profit to lower the risks caused by a reliance on lending.
In a third legal change, legislators passed a new banking supervision law to legalize the status of China's Banking Regulatory Commission. The banking regulator, run by the former head of the Bank of China Liu Mingkang, was split from the central bank in April with a mandate to oversee all banks in China, investigate illegal operations and punish offenders.
"The new law is a practical one, designed to meet the needs of the operations of the CBRC after absorbing the long-term experience of the central bank's supervision of banks and international rules," said Zhang Xiao, a member of the NPC Standing Committee in the statement.
Liu earlier this month outlined a three-part plan to help China's four biggest lenders clear their bad loans, increase capital and prepare for initial public share offers.
The government is introducing a range of measures to help its lenders improve their profitability and to meet guidelines opening the country to overseas lenders laid down when China joined the WTO at the end of 2001.
Overseas investors are each now allowed to own a maximum of 20 percent of domestic banks, up from 15 percent, as China encourages investment from global lenders such as HSBC Holdings Plc. Overseas investors can buy a combined total of 25 percent of a domestic lender up from 20 percent earlier.
Domestic lenders were this month given permission to sell subordinated debt to local investors for the first time, the banking regulator said on Dec. 9.
China's US$512 billion stock markets, regulated by the China Securities Regulatory Commission, have been hampered in attempts to open to overseas investment by concerns about price manipulation, broker corruption and corporate accounting fraud.
One in 10 public companies in a Shanghai stock exchange survey last year was found to have cooked their books.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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