The government announces measures to strengthen supervision and better allocate supervisory resources.
The China Banking and Insurance Regulatory Commission (CBIRC) issued new draft measures (Chinese only) on Wednesday that aim to more comprehensively assess the operations of foreign bank branches while gauging the level of support they receive from their head offices.
The intended rating will comprise a core assessment that includes the branch's risk management capabilities, operations, compliance, and asset quality. A second assessment would then look at the head office and include an evaluation of the business environment, and financial as well as management capabilities, while also looking at the support provided to the branches in China.
Rating Categories
Subsequently, foreign banks would be classified into five categories based on their health as reported in the assessment. The highest rating would be a Level 1 under the system, which would indicate a foreign bank with stable operations and management and one which typically has minor problems that are resolvable as part of its daily operations, and which also has strong risk capabilities.
The lowest rating, a Level 5, would be for a bank that has serious defects in operation and management that require immediate corrective measures that threaten its viability.
