China is reviewing a series of laws and regulations to tighten the supervision of financial institutions and guard against financial risks.
(By Zhao Renfeng)
Addressing a financial forum at the Chinese Academy of Social Sciences, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said the CBRC is co-operating with other related departments, submitting suggestions to the nation's law-makers on how to fine-tune articles in the Criminal Law that punish financial criminals.
The financial services industry has been undergoing tremendous changes in recent years, and the articles should be updated to keep up with the industry's development, Liu said.
"We find some articles in the current law are too general. Detailed judicial explanations on specific articles are essential to make it easier and more practical to convict financial criminals," he said.
New articles should also be added to the law because new cases such as cheating on bank loans and malpractice in the disposal of NPLs (non-performing loans) have emerged.
Liu said updating the law is becoming urgent and critical as financial institutions face severe challenges to reduce risks.
Also in the works is a revision of punishments in financial malpractice.
Administrative punishment regulations, which were promulgated in 1999, should be changed along with the financial institutions.
China's bankruptcy law is also in the process of being upgraded.
"Enough protection should be given to banks who lend when bankrupted enterprises are involved," he said.
China's financial services industry has evolved remarkably over the past two decades, making it a challenging task to set up adequate laws and regulations in place in time.
Wang Guogang, vice-director of the Institute of Finance and Banking with the Chinese Academy of Social Sciences, said that one of the GREat shifts in China's society is that where people used to see financial institutions as an independent industry like steel and cement, they now find financial institutions are closely linked with society as a whole.
"It is essential to have a comprehensive look at the legal system where financial institutions are concerned," Wang said.
The general laws and regulations, experts said at the forum, are often already in place for financial institutions to follow. But there are few detailed explanations on specific rules and also a lack of measures in place for when institutions fail to comply with regulations.
"It's like you make a rule that people have to come to the office before 8 every morning, but you don't have a rule punishing people who come after 8. So, what if people do come late?" said Huang Yi, an official with the legal department of the CBRC.
Liu said that in China, compliance with rules is often stressed, but rules can be impractical if there are no measures in place to punish people who default.
Liu said the CBRC had issued 127 rules and regulations on banks' risk control by the end of April.
Among them, 22 cover credit risks, six cover market risks, 12 cover operational risks and 23 cover comprehensive risks.
The banking regulator has since this year constantly ordered the nation's lenders to enforce internal controls and improve risk management, pledging further scrutiny on bank fraud after a series of scandals was revealed lately in the banking industry.
The CBRC yesterday said it will continue to work with the board of supervisors of commercial banks to fight financial crimes.
Liu alerted the nation's lenders to the potential credit and solvency risks and urged them to improve transparency and information disclosure.
"It is a bit contrary to China's tradition as Chinese people think domestic shame should not be made public," said Liu.
"But it is always good for banks' investors and the public since they give money to banks. Transparency is actually the lifeline for banks as it makes them healthy."