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Banks Make Progress in Improving Internal Control

China's banking regulator said Thursday the nation's joint-stock commercial banks had made substantial progress in their internal control mechanisms last year.

Three of the 11 joint-stock lenders that operate nationally have started trial operations of a management model that is popular among large international banks, the China Banking Regulatory Commission (CBRC) said in a statement.

The adoption of the new model will help the banks reduce their operating costs and improve efficiency, strengthening their positions in the increasingly competitive financial industry, it said.

Most of the banks, five of which are listed on the domestic stock market, also made progress in risk management, as they now watch not only the traditional focus of credit risk, but also moral hazards, exchange rate risk, interest rate risks and operational risks, it said.

The progress was made after inspections earlier last year by the CBRC identified major weaknesses in the banks' internal control systems.

The commission found more than 100 internal control problems at most of the banks, it said.

The joint-stock lenders, which are smaller than the nation's four State-owned commercial banks, are seen as more flexible in management but less obedient than their state-owned counterparts.

Some analysts say many of these banks failed last year to closely follow government policies meant to restrict lending to overheated industries, as they pursued profits and a bigger market share.

(China Daily January 7, 2005)

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