China bank regulator urges risk control for rural financial institutions

Special Report:Global Financial

Crisis

BEIJING, Dec. 3 (Chinese media) -- Small and mid-sized

financial institutions in rural areas should improve their risk controls amid

worsening economic conditions, China's top banking regulator said in an online

statement here on Wednesday.

"Small and medium-sized rural financial institutions

will have to face more potential risks as the global financial crisis has

expanded from foreign markets to the domestic market, from big lenders to small

banks, and from well-known international names to small enterprises," Jiang

Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC), warned

in the statement.

He urged banking regulators and provincial-level

rural financial institutions to take effective risk-prevention measures,

including helping local rural credit cooperatives that are facing losses.

The CBRC also said it will launch a three-year

campaign starting in 2009 against financial crimes in the rural banking system.

The commission has carried out similar supervisory

and investigative drives against rural financial crimes over the past three

years. These efforts uncovered 237 cases involving 670 million yuan (97.8

million U.S. dollars) in 2007.

Rural credit cooperatives have functioned as major

lenders to farmers and the agricultural sector for more than 50 years.

The rural banking system face mores credit risks than

its urban counterpart with uncertainty in agricultural production and the lack

of a modern rural social insurance net.

Statistics from China's central bank showed rural bad

loan rates averaged 13.4 percent in 2007, much higher than that of the major

commercial banks, which was 5.5 percent.