China’s city lenders to reduce speed of regional expansion

China’s regulator may reassess the operations of banks’ interregional branches as it advised them to focus on their own markets of origin.

City commercial banks in China are set to slow down their regional expansion this year, even though the banking regulator has not officially forbidden such moves, the Southern Metropolis Daily reported on Wednesday.

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC) told an industry forum in a statement that city commercial banks should focus on their own markets of origination, prevent risks and improve services.

Yan Qinmin, assistant to the CBRC chairman, told the forum that city lenders should conduct prudent expansion, but didn’t disclose if a new regulation raising the assessment standards for city bank interregional development is to be issued.

Last month, a CBRC source told the 21st Century Business Herald that the regulator may unofficially suspend approving city lenders’ expansions outside their provinces of registration during a reassessment of the interregional development of such banks.

The CBRC may undertake a reassessment of the operations of banks’ interregional branches five years after the regulator approved the first interregional expansion of city banks in a bid to contain risks.

“The expected reassessment may cover aspects of corporate governance, internal controls, credit risk and cost management at interregional branches and sub-branches, while the routine assessments will only be conducted at head office level,” an employee from a city bank was quoted as saying by the Southern Metropolis Daily.

View the full story in Business China.