Computers crash. The computers of banks crash. It happens all over the world. The writer has been involved in one such crash when, after the code was dumped and inspected, at about the millionth line was the epic reminder phrase: ‘Something important must go here.’ A programmer had put it in as a reminder and then forgotten about it.

Banks strain the limits of IT and a rough rule of thumb is that the average utilization rate of host computers should not exceed 60%. The figure on the business systems at five major commercial banks in China stands at 67%.

When the Olympics open on August 8 there will be a surge of foreign visitors and they will be using their credit cards.

Beijing is expected to have 800,000 visitors from abroad and 900,000 domestic tourists during the Olympics. The city government has announced plans to install point of sale (POS) terminals at 90% of the retail outlets at or near the Olympic venues by the end of June.

Which could easily lead to a melt down.

Guo Ligen, vice-chairman of the China Banking Regulatory Commission (CBRC), in a statement on the commission’s website warned that a combined surge in card use and stock trading could overload the country’s electronic payments system. He Guo urged banks to have trial runs, beef up equipment and expand the operating capacity of their IT systems. He announced that the CBRC would inspect major banks’ IT systems between February and July.

Guo Ligen said, ‘We can’t bring the problems to the Olympics and spread hazards outside the banking industry.’
Source: Window of China

China’s securities watchdog suspended the launch of new funds late last year in reaction to the surging domestic stock market. The Shanghai Composite Index nearly doubled last year.

Now the China Securities Regulatory Commission (CSRC) has said another two closed-end stock funds have won regulatory approval which brings the total approved since the ban to four.

According to the commission Bank of China Investment Management. and AXA SPDB Investment Managers will launch the funds.

It is suggested the two funds would be launched at ceilings of RMB12 billion ($1.67 billion) and RMB7 billion, respectively.

Bank of Communications Schroder Fund Management confirmed on Friday that a bond fund under its management had also obtained regulatory approval and the fund would be able to subscribe to new offerings.

The previously approved two stock funds, run by CCB Principal Asset Management and China Southern Fund Management would together raise about RMB14 billion.

The launch of these funds is expected to bring a new round of fresh capital into the sliding stock market.
Source: China View

The China Banking Regulatory Commission (CBRC) reports the assets of China’s banking sector rose to RMB52.6 trillion yuan ($7.32 trillion) in 2007 from RMB43.9 trillion in 2006.

According to CBRC the state-owned Bank of China, China Construction Bank, the Industrial and Commercial Bank of China, the Agricultural Bank of China and Bank of Communications make up 53.2% of the total assets.

Twelve joint-stock commercial banks, including China Everbright Bank, accounted for 13.8%, while city commercial banks accounted for 6.4%. The remaining 26.6% were covered by other financial institutions.

CBRC figures showed China’s banking sector had total liabilities of RMB49.57 trillion in 2007, up 18.8% from the previous year.

State-owned commercial banks owed RMB26.43 trillion of the total debt, up 15.5%, and joint-stock commercial banks had RMB6.91 trillion, a rise of 31.5%. The remaining RMB16.22 trillion was owed by city commercial banks and other kinds of financial institutions.
Source: Window of China

Yes, there was somewhat bad news. China uncovered RMB860 billion ($118.6 billion) in financial irregularities last year. This was reported on the China Banking Regulatory Commission Website. 117 bank managers had been removed from office.
Now for the good news:

Profits for Chinese banks grew to RMB298.7 billion at the end of 2007, up from RMB36.4 billion 2002, when the CBRC started operating.
Irregularities were down 58.4% from a year ago.
The average bad loan ratio for major Chinese banks dropped to 6.7% at the end of 2007 compared with 23.6% five years ago.
The total assets of Chinese banks’ topped RMB52.6 trillion at the end of 2007, from 2002’s RMB23.7 trillion and up on the previous year’s RMB43.95 trillion.
At the end of 2007, five Chinese banks have control or hold stakes in overseas financial players.
Seven Chinese banks have 60 overseas outlets with overseas assets topping $167.4 billion.

The regulator said it will draw lessons from the U.S. subprime crisis to improve its overseeing of new, innovative finance products.
Source: China View

China’s banking regulator has announced a timetable for the country’s financial institutions to implement new accounting rules designed to step up internal controls.

The China Banking Regulatory Commission (CBRC) said on its website that listed financial institutions, a majority of them being banks, should have implemented the new rules by now. Our illustration shows Liu Mingkang, chair of the commission.

The rules, drawn up by the Ministry of Finance last year, target listed companies and came into effect from the start of 2007.

Policy banks, the Agricultural Bank of China, unlisted joint stock banks, China Postal Savings Bank, city commercial banks, foreign banks, trust companies and financial leasing and currency dealing companies should implement the rules from the beginning of 2008. Which is about two months away.

And rural financial institutions should start complying from 2009 at the latest.

China’s four state-owned asset management companies, set up in 1999 to take on bad loans from the major four state-owned commercial banks, should also switch to the new standards in the year after they complete reforms.

The CBRC said the new accounting rules will enable both investors and regulators to have better access to the accounting information of financial institutions.
Source: Forbes

China Merchants Bank, labeled the best bank in China by finance magazine Euromoney, has been given the green light from the national banking regulator to set up a financial leasing company.

The Shanghai-registered leasing company will be solely funded by the CMB, with a registered capital of RMB2 billion ($266.89 million).

The main business of the company will cover procurement of aircraft, ships and other large equipment, and financing for small and medium-sized companies. The bank is now making final preparations to open for business.

An issued statement reads: ‘The non-banking financial business of this new company will complement the bank’s traditional banking businesses.’

Other major banks including China Construction Bank, the Industrial and Commercial Bank of China, the Bank of Communications and the China Minsheng Banking have also been approved by the China Banking Regulatory Commission to set up financial leasing companies.

The Rules Governing Financial Leasing Companies that took effect this March have allowed domestic commercial banks to hold stakes in financial leasing companies.

Yang Boqin, a senior official with Shanghai Ronglian Finance Leasing Share, said, ‘In the United States, about 30% of large operating equipments, including aircraft and ships, are leased compared with only 3% in China, which indicates a huge potential market.’

Cai Esheng, deputy chairman of the CBRC, has said more qualified banks would be allowed to set up financial leasing companies based on actual needs. The illustration shows customers lining up for ATM machines at the China Merchants Bank. Somehow it seems appropriate.
Source: Window on China

HSBC has received regulatory approval to open a wholly owned banking subsidiary in rural China. It is the first overseas bank to get the go-ahead from the China Banking Regulatory Commission (CBRC) to offer rural services.

The subsidiary, HSBC Rural Bank, will be based in Cengdu County of the city of Suizhou in Central China’s Hubei Province.

HSBC Rural’s operation is expected to cover an area of 6,900 sq km, with a total population of two million. The bank states this area has a significant agricultural sector and a rapidly developing rural economy.

Stephen Green, HSBC’s group chairman, said: ‘We very much support China’s policy priority to develop its rural economy and intend to play a full part in these ambitions.’ He said HSBC has extensive experience in rural finance in Brazil, India, Indonesia, the Philippines and Mexico.

Vincent Cheng, chairman of HSBC, said his bank saw great potential for economic development in China’s rural areas. He said, ‘Our rural bank will serve the needs of China’s agricultural sector, which is undergoing rapid development, aiming to provide tailored financial services to rural communities and companies.’

The CBRC has introduced new rules to expand market access for financial institutions seeking to provide banking services in rural areas.
Source: China Daily

The State Administration of Foreign Exchange (SAFE) reports that foreign exchange and public security authorities have broken up a Shenzhen underground bank that was doing business nationwide. The bank provided illegal funding for its clients to invest in the stock and property markets as well as other businesses.

SAFE stated that some major State enterprises were involved in the illegal deals without naming them. As the domestic stock and property markets continue to boom, analysts said many enterprises, including some major State firms, have sunk money into the markets for quick profit.

Last week, the State-owned Assets Supervision and Administration Commission (SASAC) said the China Shipping (Group) Company and the China Nuclear Engineering and Construction (Group) Corporation had used bank loans to invest in the stock and property market. The SASAC discovered the irregularities in its performance appraisal of 150 central State enterprises under its control.

Li Zhikun, analyst with the China Jianyin Investment Securities, said, ‘Some of the funds of underground banks may have come from overseas in the form of speculative money.’

The SAFE said 55 accounts had been frozen in the Shenzhen raid, involving RMB4.2 million ($556,000). Six people have been detained. The bank’s major clients were from the coastal provinces of Guangdong, Jiangsu and Zhejiang.
Source: China Daily

The state press has reported China will spend $40 billion bailing out the debt-laden Agricultural Bank of China which is considered by outsiders to be the weakest of the country’s big four commercial banks.

(Back in 2005, according to a report in the Chinese media, former Agricultural Development Bank of China vice presidents Hu Chushou and Yu Dalu were charged with embezzling RMB810 million ($98 million) which would not have helped.)

The Economic Observer reported the funding will come from China’s new forex investment agency, which will manage part of the country’s foreign exchange reserves of more than $1,330 billion.

China’s finance ministry was authorised early this year to issue $205 billion in bonds to fund the establishment of the agency. Agricultural Bank is the last one of the big four state lenders to undergo a government-aided financial overhaul. The aim is that once this is completed — the aim is by the end of this year — then the bank could be listed on the stock market.

The Economic Observer reports that the forex agency is expected to be set up in September and would would use $65 billion to take over the central bank’s investment arm, Central Huijin Investment, which would then inject $40 billion into the Agricultural Bank.

China has bailed out the other three major banks — Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank — with a total of $60 billion.
Source: Telegraph.co.uk

Bank loans to China’s energy-consuming and high-polluting sectors slowed down in the first five months of this year as the government worked to save energy and reduce greenhouse gas emissions.

The China Banking Regulatory Commission (CBRC) said in a statement that outstanding loans from major Chinese banks to these sectors rose by RMB104 billion ($13.7 billion) in the first five months to RMB1.5 trillion ($198 billion). Notice carefully the word is trillion as in a thousand billion.

The increase was RMB52.7 billion (roughly $7 billion) less than the rise in the same period last year.

The energy-consuming and high-polluting sectors in China are those involving oil processing and coking, chemicals, construction materials, iron and steel, non-ferrous metals, and power generation.

Most new loans were granted to large firms with advanced production methods and environmentally friendly techniques, while financing was cut to small plants with high energy consumption and pollutant discharges.

Liu Chengxiang, a statistics official with the CBRC, said, ‘Banks have tightened control on lending to these sectors, but with their production still surging, the task of reducing energy consumption and emissions remains arduous.’ The CBRC, China’s banking watchdog, vowed to carefully check the banks where outstanding loans to the restricted sectors continue to soar.
Source: China View