July 07, 1999
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| July 07, 1999 | atimes.com | |
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| China China sets up bank supervision system with Basel principles BEIJING - China has basically established a banking supervision system that is in keeping with the Basel core principles for effective banking supervision, according to Chinese and foreign experts and officials from the financial sector. Basel Committee on Banking Supervision (BCBS), sponsored by the Bank for International Settlements (BIS), is an internationally accepted institution for developing banking supervision. The experts and official said that the radical reforms in the financial sector over the past few years have translated into an effective central bank supervision system that will further reinforce risk management in the banking sector. They reasoned that major reforms in the fields of central bank restructuring, supervision methods, commercialization of state-owned banks, financial risk management, appropriate financial laws and regulations have largely improved the rationality and effectiveness of banking supervision. In September 1997, the BCBS promulgated 25 core principles for effective banking supervision, aiming to provide effective measures for various countries to reinforce their financial stability. As a member of the BIS, the People's Bank of China (PBOC), China's central bank, participated in the drafting and revising of these core principles. PBOC professor Tang Xu said that over the past few years China has been conducting reforms on the financial sector in accordance with the Basle core principles, and has made painstaking efforts to establish modern banking rules and supervising principles. ''An effective banking supervision system in keeping with the Basle core principles has taken shape in China,'' he said. A primary requirement of the core principles is that commercial banks must have a capital adequacy rate of no lower than 8 percent. The assets of China's banks have been booming in tandem with the country's opening and reform drive over the past 20 years, which led to relative dropping of their capital adequacy rate. Tang Xu said that the revoking of credit ceiling on commercial banks in early 1998 was a significant step toward the commercialization of banks. The adoption of asset-liability management is a fundamental transition for planned system to market-oriented system, which enabled the central bank to use more indirect tools to control the financial market. He said that the central bank's financial supervision now enjoys an appropriate legal environment. Since 1995, China has promulgated over 200 laws and regulations in relation to financial supervision, including a central bank law, a commercial bank law and an insurance law. The experts said China's banking reforms have both consulted the core principles and considered the country's special conditions, and they are critical to the healthy and steady development of China's banking sector. However, they warned that there are challenges in effective implementation of these reforming initiatives, which require skills and judgments by bank staff and regulators alike, and that may take time and extensive training to develop. (Asia Pulse/XIC) | |||||||||
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