China to reform and restructure smaller banks

Beijing

CHINA will take steps including management reshuffles and fund infusions to bolster the weakening profiles of its smaller banks, said the vice-chairman of the banking and insurance regulator , according to financial news outlet Caixin on Sunday.

As financial stability remains the top priority, the regulator will use reform and restructuring as the key approach to resolving banking risks, instead of doing "surgeries", said Zhou Liang, vice-chairman of China's Banking and Insurance Regulatory Commission (CBIRC), at a forum in Beijing on Sunday, Caixin reported.

The health of China's smaller banks has come under renewed scrutiny recently, as two local lenders suffered bank runs in less than two weeks amid fears over poor management and liquidity issues.

"Smaller banks are small financial institutions by size, but they carry a great spillover risk," said Mr Zhou.

The smaller sector is facing risks because of a difficult macro environment both at home and abroad, poor management, and credit risks triggered by deteriorating financial conditions of companies, Mr Zhou said. He said some of the reform steps would include improving corporate governance, writing off non-performing assets and replenishing capital. REUTERS