China presses listed banks for new risk disclosures

Fri Jan 10, 2014 4:05am EST

Related Topics

* CSRC revises rules on disclosures for listed banks

* Regulators want to increase market discipline

* New disclosures required on off-balance-sheet business

* Move to standardise disclosures by various banks

SHANGHAI, Jan 10 (Reuters) - China's securities regulator will require the country's listed banks to increase disclosure of off-balance-sheet exposure, asset quality and other risk indicators, in a move to increase market discipline and temper banks' expansion into risky new business lines.

The China Securities Regulatory Commission has revised the regulations detailing what information listed banks must disclose in their regular financial statements, the agency said in a news release on Friday.

"Following the daily expansion of commercial banks' traditional credit business, newly-emerging off-balance-sheet business lines, and hybrid business lines ... various countries have reached a consensus about strengthening information disclosure and transparency requirements," the agency said.

The revisions, which take effect immediately, require new disclosure on risk indicators, including more detailed information on wealth management products (WMPs), which have emerged as a major new business line for banks since 2010.

Banks market WMPs to customers as a higher-yielding alternative to traditional bank deposits, using the funds raised to make off-balance-sheet loans to risky borrowers such as property developers and local governments.

Analysts have warned that WMPs and other forms of off-balance-sheet lending have fueled a massive increase in government and corporate borrowing in recent year, raising risks of a bad-debt crisis.

The rules also require new disclosures on asset quality and market risk, the agency said. Asset quality has emerged as a focus for investors this year, as bankers have said they expect bad loans to rise as China's economy slows.

Earlier this week, the China Banking Regulatory Commission also added new disclosure requirements for banks, requiring all banks with assets over 1.6 trillion yuan ($264 billion) to report their off-balance-sheet exposures and other indicators in line with new global rules to increase regulation of systemically important financial institutions.

The CSRC's revised rules also call for standardising the methodologies used to calculate various risk indicators that banks have already been reporting and simplifying certain requirements to avoid repetition.

The rules also simplify certain requirements and give banks more flexibility to present certain information in a form that is easier for investors to understand. ($1 = 6.0550 Chinese yuan) (Reporting by Gabriel Wildau; Editing by Kim Coghill)

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