THE government will take steps including management reshuffles and fund infusions to bolster the weakening profiles of smaller banks, vice chairman of the national banking and insurance regulator said, according to financial news outlet Caixin.

As financial stability remains the top priority, the regulator will use reform and restructuring as the key approach to resolving banking risks, instead of doing “surgeries,” said Zhou Liang, vice chairman of China’s Banking and Insurance Regulatory Commission (CBIRC), at a forum in Beijing on Sunday.

“Smaller banks are small financial institutions by size, but they carry a great spillover risk,” Caixin quoted Zhou as saying yesterday.

The smaller bank sector is facing risks because of a difficult macro environment both at home and abroad, poor management at smaller banks, and credit risks triggered by deteriorating financial conditions of companies, Zhou said.

Zhou said some of the reform steps would include improving corporate governance, writing off nonperforming assets and replenishing capital.

“For institutions that have relatively severe problems, they need to introduce new strategic investors to carry out structural reforms,” Zhou said.

Earlier this year, a rare government seizure of then little-known Baoshang Bank and a State-rescue of Jinzhou Bank and Hengfeng Bank revived concerns about the underlying health of hundreds of small lenders in the country.

(SD-Agencies)