CBIRC issues new rules to guide rural commercial banks' development

China’s top banking regulator announced a new set of principles and rules, aiming to guide development of the country’s rural commercial banks to better serve those areas as well as micro and small-sized enterprises.

The announcement came after the country’s annual Central Economic Work Conference held last month, which called for more financial reforms in 2019, including pushing the business of urban and rural commercial banks back to their “original mandate.”

The China Banking and Insurance Regulatory Commission (CBIRC) said on Monday that rural lenders function as the backbone for funding issues concerning agriculture, the countryside and farmers, in addition to giving loans to private businesses in the counties.

Their healthy development will be of great significance for building a multi-level and differentiated financial institution system and meeting the diversified financial needs of the real economy, the watchdog said in its statement.

Data from the CBIRC shows that, as of the end of last September, there were a total of 1,436 rural commercial banks, with assets and liabilities both exceeding 23 trillion yuan (US$3.4 trillion).

With around 10 percent of assets among the banking sector, rural commercial banks contributed to a respective 22 percent and 21 percent of loans for agriculture-related issues and micro and small enterprises.

However, the top regulator noted that a small number of rural banking institutions have strayed from their main business scopes while expanding their operations.

To resolve the emerging problems facing rural lenders, especially county and urban banks, CBIRC requires rural commercial banks to accurately grasp their differentiated positioning in the whole banking system and establish their operational priorities, which should be suitable for the economic situation and industrial characteristics of their region.

Also, rural banking participants are requested to perfect their corporate governance mechanisms, focus their business on serving the local economy, the county and communities, and make innovative financial products to manage their financing costs.

In addition, the banking regulators formulated a set of systems to monitor and evaluate the financial services offered by rural commercial banks.