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Setting the benchmark in corporate integrity

China orders major banks to increase disclosure

China's banking authorities have introduced new laws requiring major mainland banks to disclose information on 12 key indicators
The China Banking Regulatory Commission (CBRC) has ordered major banks to disclose information on 12 key indicators set out by the Basel Committee

China’s banking authorities have introduced new laws requiring major mainland banks to disclose information on 12 key indicators

On January 8 the China Banking Regulatory Commission (CBRC) ordered major Mainland banks to disclose information on 12 key indicators outlined by the Basel Committee. The new rules apply to commercial banks whose assets exceeded 1.6trn yuan at the end of last year, as well as those labelled global systemically important banks (G-SIBs). The new rules signal an effort on the part of Chinese authorities to curb concerns surrounding rising national debt, and an attempt to reduce the overall percentage of non-performing loans. Put crudely, the rules – which have come into immediate effect – look to improve governance and transparency for a banking sector that has too often fallen foul of a bad reputation.

The new rules signal an effort on the part of Chinese authorities to curb concerns surrounding rising national debt

“In recent years, the scale, interconnectedness, and complexity of Chinese banks has continuously increased, and it is necessary to implement higher standards for banks whose degree of systemic importance is relatively large,” wrote the CBRC on its website, January 8.

The 12 key indicators include the disclosure of cross-border assets and liabilities, off-sheet assets, liability claims relating to financial institutions, available trading assets, assets available for sale, and outstanding over-the-counter derivatives, to name a few. Whereas the vast majority of the new CBRC measures will require little change, given that many are already disclosed by those affected, some will force certain banks to instigate fundamental changes to their disclosure policies and improve upon their transparency by quite extraordinary degrees.

According to the new rules, the banks must disclose the relevant information either within four months of their accounting year ending or no later than the end of July.

After having lent out vast sums of money in order to maintain China’s sky-high GDP growth, some fear that certain unwise and ultimately unrecoverable investments may be being hidden. The CBRC’s newly enforced rules, however, will ensure that regulatory authorities can keep a close watch on the country’s leading banks and protect against bad loans.



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