China to consolidate oversight of banks' business

BEIJING, Nov 8 (Reuters) - China will soon consolidate its supervision over banks and their subisidiaries to guard against potential fresh risks resulting from their diversifying into new business lines, a top banking regulator said on Thursday.

Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC), said that by checking not only banks' books but those of separate units in which they hold stakes, the agency hoped to stem the spread of risk between sectors as the firewalls between them are gradually removed.

''Business diversification is a double-edged sword -- it can bring more sources of profit, but risks can easily spill over from one sector to another,'' Jiang told a financial forum.

Jiang said the recent woes in the U.S. subprime mortgage market underlined the risks of increasingly sophisticated financial markets.

''So the adoption of consolidated supervision is an inevitable choice for meeting the changing market situation,'' he said, adding that the various financial regulators would continue to work independently.

Beijing, which has long enforced barriers between the banking, insurance and securities sectors, is cautiously letting them down to allow for greater synergies among them.

A banking regulatory official told Reuters that the watchdog would soon issue a set of rules on the consolidated supervision, then start carrying it out by the end of the year.

Jiang said his office would increasingly focus its attention on supervising investors with shares in many banks; banks' clients; the interbank market; banks' financial products; and their information technology systems.

As part of its enhanced risk oversight, CBRC Chairman Liu Mingkang told Reuters last month that the agency would increasingly demand that borrowers disclose more information about themselves.

REUTERS AK DS1152