China yesterday announced it will unify a rating system for commercial lenders as the country moves to contain risk and bolster balance sheets in the banking industry.

The China Banking Regulatory Commission (CBRC) plans to assign separate rates on a lender's capital adequacy ratio, asset quality, management, earnings performance, liquidity and market risks, according to a statement published on the agency's Website.

The banking regulator will also work out a general rate based on individual ones as part of efforts to streamline oversight, the statement said.

The country plans to adopt a deposit-insurance system, in which banks with different rates will be charged accordingly.

"The move will let regulators better analyze, judge and evaluate risk at banks, thus prompting more efficient supervision," the statement said.

China has increased reforms of state-owned banks as the government expects to drastically reduce bad loans and list the nation's biggest lenders overseas to boost competitiveness before the market opens further to foreign competition late next year.

China Construction Bank (CCB) and Bank of Communications (BOCOM), the country's third- and fifth-biggest lender respectively, have raised a cumulative US$11.4 billion in initial public offerings this year. Foreign investors have pounced on the stocks to access the nation's huge household savings.

Industrial & Commercial Bank of China (ICBC) and Bank of China (BOC), the country's top two lenders, announced plans to float shares next year.

China will speed up the development of a risk-management platform for its commercial lenders. It will focus on evaluating risk levels, predicting risk flows and making provisions for potential losses, yesterday's statement said.

Financial regulators have urged domestic lenders to bring in overseas expertise to control risk as they push forward innovative derivate products, the statement said.

Separately, China Central Television reported yesterday that China's four biggest state-owned banks cut their combined non-performing loan ratio 5.38 percentage points in the first 10 months to 10.18 percent.

Industrial & Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China cut combined bad loans to 1.02 trillion yuan as of October 31, a reduction of 552 billion yuan, CCTV said, citing the CBRC.

(Shanghai Daily December 5, 2005)