BEIJING -
China's banking regulator has issued guidelines to
encourage financial innovation by commercial
lenders, such as increasing earnings made from
fees and giving out less risky loans.
The
guidelines will take effect next Monday, the day
China fully opens its banking sector to foreign
lenders in line with its commitment to the World
Trade Organization.
According to Tang
Shuangning, vice-chairman of the China
Banking Regulatory Commission
(CBRC), China's banking industry urgently needs to
speed up its financial reform to deal with rising
competition after fully opening.
"Chinese
commercial banks lag far behind their
international counterparts in terms of financial
innovation," Tang said.
He said
non-interest income generally accounts for more
than 50% of the total income of big international
banks. But the highest rate for Chinese commercial
banks from fees is less than 30% and most of banks
earn less than 10%.
He said the guidelines
are the first concerning financial innovation
issued by the banking regulator, signaling a new
stage of reform.
According to the
guidelines, the CBRC will set up a sound legal
environment to encourage financial innovation. The
regulator will further streamline approval
procedures and strengthen supervision to
facilitate financial innovation.
The
guidelines also emphasize the importance of risk
control. They require commercial banks to have a
good knowledge of their businesses, risks, clients
and competitors.
In addition, the
guidelines clarify commercial banks' obligations
to consumers, such as correct disclosure of
information, professional services, protection of
assets, and offering effective complaint channels.
Despite this need for reform, Tang said,
commercial banks in China have made progress in
financial innovation.
The CBRC's
statistics show the trading volume of major
commercial banks reached 14 trillion yuan (US$1.77
trillion) last year.
Nearly 30 Chinese
banks offer yuan wealth management services, with
a total value of 130 billion yuan.
A total
of 17 foreign and Chinese banks have been approved
to invest clients' assets overseas under the
qualified domestic institutional investor (QDII)
program. So far, they have launched nine QDII
products.
But more financial innovations
need to be made, Tang said.
In addition to
financial reform, commercial banks are being asked
to engage in public education, informing investors
that they should be responsible for their own
purchasing decisions.
