by Samuel Rubenfeld for The Wall Street Journal
China’s high-profile anti-corruption drive has turned its head toward the nation’s financial sector, as multiple reports noted this week, all of which pointed to the questioning of a senior executive of one bank and a board member of another regarding possible corruption. To that end, Beijing’s anti-graft authorities recently formed a department to focus mainly on the financial sector, the Wall Street Journal reported Tuesday, citing Chinese officials familiar with the matter.
Fitch Ratings, in a statement on Tuesday, said the investigations of the two bank leaders shouldn’t greatly affect their employers, but they do “underscore broader issues” of governance, management and political risks at China’s banks. The agency said its ratings for China’s banks “already reflect a degree of risk related to weak corporate governance,” and that a lack of transparency, as well as nascent regulatory and legal systems, are a sector-wide constraint on ratings. ”These events…could be a precursor to a wider investigation into corporate management. If so, as far as the financial sector is concerned, it has the potential to enhance transparency and improve governance standards in the long run–which would be credit positive,” said Fitch. Read more here.