BEIJING, June 15 -- China's banking regulator is expected to introduce a new credit rating method to assess the risks associated with lending money.
The move is aimed at helping banks to manage risks more effectively and bring techniques for doing so in line with global norms.
Sources close to the China Banking Regulatory Commission (CBRC) said the regulator would adopt a new system the two dimensional framework credit rating system .
"With the adoption of the new credit rating system, banks will develop more types of financial products and services for clients based on a more precise risk assessment, " said Freddie Chui, a partner of global financial services at Ernst & Young in Beijing. He added the framework was first regulated in the Basel II Accord (also called the new Basel Accord), a global accord on bank capital standards and international financial reporting standards.
The framework includes ratings in two aspects. One is the "obligor" rating, which looks at the borrower's financial status and capability of paying back money. The other aspect is the "facility" rating, which analyzes a borrower's collateral to calculate the actual loss if a risk occurs.
"New international rules are posing bigger-than-expected challenges to domestic banks, but Chinese regulators are determined to make banks comply with global accords," Liu Mingkang, chairman of the CBRC, said earlier.
Meanwhile, China Construction Bank announced some new appointments yesterday.
"Pang Xiusheng and Zhu Xiaohuang are, respectively, the bank's new chief financial officer and chief risk officer," said Xi Deyan, the bank's spokesman.
(Source: China Daily)