China's bank regulators, responding to public complaints, have issued a notice voicing a crackdown on the irregular practices and service fees of commercial banks.

The number of service fees increased from about 300 in 2003 to more than 3,000 in 2010. But as the number of fees has increased so have the complaints from the public.

The net profits of the 16 listed banks in China totaled 890 billion yuan ($141 billion) in 2010 and 1.2 trillion yuan for the first nine months of 2011.

Seven mainland banks rank among the world's top 10 most lucrative banks, with the Industrial and Commercial Bank of China (ICBC) as No 1. But ICBC's quality of service is hardly satisfactory.

Because of the limited intermediary businesses and immature financial derivatives' trade at home, Chinese banks depend heavily on rate margins and paid services for their profits. The continuous growth of the consumer price index (CPI) has led to years of negative interest rates for depositors, and the frequently increased interest rates for loans make rate margins a reliable profit source for banks.

The newly issued notice classifies banks' service charges into those fixed by the government, those guided by the government, and those adjusted by the market. But even while it is apparently an effort to integrate China's banking service into international conventions, the notice does not deal with the existing 3,000 paid services at all.

The notice is by no means binding and does not even send a to-the-point signal. The articles regulating arbitrary fees are expressed in ambiguous and opaque ways, without mentioning any concrete punishment measures and accountability system for banks violating customers' rights.

Most commercial banks are cash cows for governments, which leaves consumers helpless. However, the authorities' tolerance toward banks will only spoil them. While some hope the National Development and Reform Commission can lead amendments, a third-party institution could be introduced to participate in drafting and amending such notices and regulations in the future.

A healthy banking system not only benefits customers, but also the national economy in the long run. Any short-sighted, profit-oriented banking practices will only mean paying a greater cost in the future.

(China Daily 02/14/2012 page8)