China's banking regulator said Wednesday it plans to bring its supervisory regime up to internationally accepted levels in five years to ensure stability in the nation's banking sector.

Tang Shuangning, vice-chairman of the China Banking Regulatory Commission (CBRC), said his commission aims to bring two thirds of its regulatory measures up to the requirements of the Core Principles for Effective Banking Supervision by the Basel Committee, which formulates industry criteria for the world's banking sector.

The CBRC will strive to meet all requirements by the Core Principles by 2009, making sure all its supervisory measures are strictly implemented, the official said.

"The Core Principles provide guidance on building effective banking supervision systems for all countries, and have become common criteria for effective banking supervision," he said in an article published on the CBRC's website Wednesday.

Chinese banks hold more than 90 percent of the nation's financial assets, which makes economic growth and the smooth function of the banking sector highly interdependent.

But the years of planned economy, weak risk management at Chinese banks and the late development of the banking supervisory regime have resulted in huge risks in the Chinese banking industry.

Chinese banks are saddled with huge non-performing loans and most of them face the problem of capital inadequacy.

"Rivalry from foreign banks will increasingly intensify after 2006, and the trend of economic and financial globalization will further amplify the banking risk in China," Tang said. "China's banking supervision is facing a more complicated situation."

The CBRC completed a self-assessment report last year by collating with the Core Principles in an effort to identify weaknesses and deficiencies.

The report showed problems in a variety of aspects, including uncertainties like a structural imbalance of the economy and high employment pressure that may affect the preconditions of effective bank supervision.

The report also found factors that constrain the independence of regulators, such as problems of incomplete corporate governance structures at banks that affect prudential surveillance.

(China Daily October 14, 2004)