Xinhua Finance, the largest provider of financial information in China, has signed an exclusive agreement with Fermat, a leading European provider of risk and performance management software to the global banking industry, to distribute and support Fermat's range of Basel II, risk and performance management software solutions in mainland China.

The deal is significant on two counts. First, it shows that China's mainland banks are really no different from those of the rest of the world in their desire to benchmark performance and make better use of their capital — by being able to demonstrate compliance with Basel II rules, banks can get away with smaller capital reserve requirements.

At present, most Chinese banks' Basel II initiatives are still being defined or in the early planning stages as the market awaits a more detailed interpretation of the accords from China's regulator.

And second, as China's bank sector opens up, domestic banks are more likely to adopt western tools and methods for risk management, both to satisfy government regulations and to sooth foreign investors' concerns about the sector's sometimes questionable accounting practices.

The pact with Xinhua should help Brussels-based Fermat to extend its presence in Asia to the rapidly internationalising Chinese financial sector.

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