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Banks urged not to focus on 'blind' buildup

CHINESE banks shouldn't seek "blind" expansion without considering the costs and risks of new businesses, the nation's top banking regulator advised yesterday at the Lujiazui Forum.

Domestic banks should also build up a base of smaller clients to expand revenue channels and diversify risks instead of only catering to big customers, said Liu Mingkang, chairman of the China Banking Regulatory Commission, during a keynote speech at the forum.

"Chinese banks should learn a lesson from the global financial crisis," said Liu. "Lenders should boost risk controls and target core clients in core markets."

China has launched a 4 trillion yuan (US$590 billion) stimulus package to spur domestic consumption and bolster exports.

The central government has also lifted a loan quota system for banks as part of efforts to boost liquidity.

Chinese banks have extended a combined 5.17 trillion yuan in new yuan-denominated loans in the first four months of this year, which already exceeded the central government target of 5 trillion yuan for the entire year.

Liu cautioned that Chinese banks shouldn't relax risk controls or overuse leverage tools. Lenders must ensure that they only operate businesses whose risks can be contained with specific management schemes, he added.

"Banks shouldn't think that being big will definitely mean you won't lose. Sometimes being small is beautiful," said Liu, referring to the size of a bank.

"We don't want to see bubbles" in the industry, Liu said.

Banks should also give priority in offering loans for projects in environmental protection, infrastructure construction and high technology sectors as they answer the government's call to increase credit support, said Liu.


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