By Bloomberg News Dec. 23 (Bloomberg) -- China’s central bank plans to study how to strengthen oversight of risks across the financial system, an effort that echoes measures under way in the U.S. and Europe in the aftermath of the crisis. The People’s Bank of China “will study establishing a macroprudential management system,” the bank said in a quarterly monetary statement in Beijing today. The aim would be to prevent risks and ensure the safety of the financial system, it said. Today’s statement follows calls by U.S. Federal Reserve Chairman Ben S. Bernanke for regulators to examine risks that can develop across financial firms and threaten the entire industry. Economists have warned of the dangers of asset bubbles in China after a record credit boom, and the PBOC reiterated it will strictly control lending to areas with excess capacity. “China’s aggressive injection of liquidity into the banking system leaves the country vulnerable to some of the same potential problems that hit western economies,” said David Cohen, an economist at Action Economics in Singapore. “They recognize that they’re not immune.” While China’s banks mostly side-stepped the mortgage-linked assets that threatened the U.S. financial system, this year’s lending has brought its own risks. Chinese banks’ capital strength is probably more “strained” than it appears as lenders use off-balance sheet transactions to make room for lending growth, Fitch Ratings said Dec. 17. Bank of China Ltd. said last month it’s studying “various options” to replenish capital. Fan’s Warning The central bank said today that it would “manage money and loan growth, guide financial institutions to lend in a balanced manner and avoid excessive volatilities.” Central bank adviser Fan Gang cautioned Nov. 18 that the nation needed to be on alert for bubbles in equities, real estate and commodities. Lenders advanced a record 9.21 trillion yuan ($1.3 trillion) of new loans in the first 11 months to support a 4 trillion yuan government stimulus plan. Credit growth has slowed since July after the regulator told lenders to pace their lending to avoid possible bubbles. The credit boom has driven an economic rebound, with Citic Securities Co., the nation’s biggest listed brokerage, predicting today that growth may surge to as much as 12 percent next year unless the government raises interest rates. Housing-Market Collapse In the U.S., an unprecedented surge in mortgage lending preceded the housing-market collapse that triggered almost $1.7 trillion of losses and credit writedowns worldwide since mid-2007. American regulators have acknowledged failing to sufficiently police lending practices across the system. Bernanke said Dec. 7 that all “systemically important financial institutions, not only banks, should be subject to strong and comprehensive supervision on a consolidated, or firm- wide, basis.” The European Commission in September proposed a systemic- risk board as part of an overhaul of regulation following the worst financial crisis since the Great Depression. Part of that proposal includes creating regulatory bodies for the banking, securities and insurance industries. EU finance ministers this month approved forming the three regulators, overcoming objections from the U.K. European Central Bank Vice President Lucas Papademos said Dec. 12 that greater regulation and oversight of banks can help rather than hamper economies, aiding long-term growth. --Li Yanping, Paul Panckhurst. Editors: Paul Panckhurst, Chris Anstey. To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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