China nears new rules for bankrupt banks (Reuters) Updated: 2006-02-07 10:52 A new bankruptcy law for
China is likely to be approved this year, paving the way for new rules to tackle
failed banks, insurers and stock brokerages, the China Securities Journal
said on Tuesday.
While China has shut down dozens of its lenders, the
passage of a revised bankruptcy law has been held up by debate over what to do
with laid-off workers.
"The bankruptcy law is expected to get approval this year and the enactment
of regulations aiming at handling the bankruptcy of financial institutions will
not be far off," the newspaper said, citing official sources.
"The law will enable relevant agencies under the cabinet to formulate
regulations to handle bankruptcies among commercial bank, insurance firms and
stock brokerages," the newspaper said.
Tackling the bankruptcy of financial institutions needed special rules as
their failures could affect the nation's social stability and financial
security, the newspaper said.
Central bank officials have called for the passage of the revised bankruptcy
law to protect creditors, including banks.
China's current bankruptcy law
was adopted in 1988 and is widely seen as outdated.
China tightened its grip on financial institutions after the 1997/98 Asian
economic crisis, fearing problems with debt-ridden banks and trust firms could
trigger financial turmoil.
It has shut down dozens of trusts and banks, including Guangdong
International Trust and Investment Corp. (GITIC), Hainan Development Bank and
China Venturetech Investment Corp. and a number of credit cooperatives.
The government has injected $60 billion in capital into three major state
banks to help shore up the debt-laden sector as global giants are due to gain
unfettered access to the market by late 2006 in line with World Trade
Organisation commitments.
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