Banks mature with improved governance, risk management
Updated: 2007-12-04 16:18
As the sector continues to mature, Chinese banks have significantly improved their corporate governance and risk management, according to a new report released by the Research Center of Corporate Governance of Nankai University in Tianjin.
Publicly listed banks in the country had superior corporate governance performance to the more than 1,000 other listed enterprises on the Chinese mainland, according to the recently released study.
A total of 135 domestic banks now have more than an 8 percent capital adequacy ratio, while only eight banks reached the standard at the end of 2003, the report says.
Banks are required to have at least an 8 percent capital adequacy ratio before they can have a commercial operation and apply for mainland listings. Many banks now have a capital adequacy ratio surpassing 12 percent.
"Heated competition brought by foreign banks since the country opened its financial market, increasing mergers and acquisitions and expanding demand for service diversification and specialization have pushed Chinese banks to improve their corporate governance," says Liu Mingkang, chairman of China Banking Regulatory Commission (CBRC), the country's banking watchdog.
While significantly improving their corporate governance, banks have at the same time greatly increased their profitability.
Among the 10 most profitable listed companies, five were from the banking sector.
Industrial and Commercial Bank of China (ICBC), the country's largest commercial bank, recorded a net profit of 63.3 billion yuan in the first three quarters of 2007, the highest of the 66 listed companies whose net profits were 1 billion yuan more.
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