BEIJING, Oct. 10 – The China Securities Regulatory Commission has requested unofficial “audits” of all foreign financial institutions operating in the country, amid concerns that an overseas bank failure could lead to the global credit crisis spilling over the mainland.
The decision also includes Hong Kong banks as well as international entities. CSRC has ordered that all joint-venture fund management groups to report on the financial stability of their foreign partners and provide details of how the global banking crisis could affect operations in China.
According to an e-mail sent by the CSRC and obtained by Reuters, “Recently, the international capital markets are hugely affected by the subprime crisis.”
“In order to understand foreign shareholders’ situations, and strengthen supervision, JV fund companies please obtain information and pay close attention to the operational status of foreign shareholders.
“Please submit after the national holiday a report in the form of an email on how your foreign partners are affected by the financial crisis and how that could affect the joint venture fund company.”
China’s banking watchdog has imposed stricter guidance on capital adequacy requirements, while the country’s insurance regulator has also kept a closer watch on insurers’ repayment abilities. Last week, the People’s Bank of China instructed executives of the country’s four largest banks to ensure adequate liquidity in the domestic interbank market.
More than half of the country’s 60 fund management companies are foreign invested JV’s. In fifteen of these companies, the foreign partner holds 49 percent; including the troubled AIG and Fortis.
Last month, Shanghai-based, Hua An Fund Management Co, said that its overseas investment fund had been seriously affected by the collapse of Lehman Brothers Holdings Inc. In 2006, the company was the first to introduce a mainland fund that could invest abroad and appointed Lehman Brothers as its overseas investment adviser.