BOC Takes Active Measures to Construct Firewall of Credit Extension

On November 1st, Wang Zhaowen, spokesperson of Bank of China, briefed the press that the Credit Administration Department, established after the launch of joint-stock reform of Bank of China, brought its function of credit granting review into full play, and played a key role in risk prevention and internal compliance. The Credit Administration Department stopped a batch of credit extensions that didn t fulfill the preconditions or were conducted through non-standard procedures, hence effectively eliminated operational risk and compliance risk thus induced.

He said that credit granting review mainly included review of the fulfillment of credit preconditions and independent examinations of each operational procedure before the use of loans. When credit preconditions were fulfilled and conducted through complete and compliant procedures, Credit Administration Department would issue a notification of credit granting to departments responsible for financial management.

If credit preconditions were not fulfilled or the reply was required for modification, the Credit Administration Department would inquire the business initiation department for further implementation, or submit to the risk management department for re-review. Strict and independent review procedures had been established during credit extension procedures.

The spokesman also said that after nearly one year s endeavor, all the 32 tier-1 branches of Bank of China had organized credit granting review teams, and successfully started to perform its duty by now. All the direct subordinating credit granting institutions in cities where the headquarters of tier-1 branches were located had established credit granting review procedures.

Over 90% of tier-2 branches and their subordinates also established such firewalls. Credit granting review, an important measure of risk control from the roots is part of policies adopted to upgrade the risk management system of Bank of China. The construction of credit granting review system had achieved certain accomplishments.

At present, Bank of China was carrying on system construction, and standardizing the review content, work standard and operation procedures. In future, the Bank would bring in online review technology to enhance efficiency, improve risk control capability through sectional authorization, and reinforce branches management to improve the execution of credit.

The independent credit review procedure set by Bank of China represents the Bank s leading position in the risk management among domestic commercial banks. The credit granting review is now playing an increasingly important role.