BEIJING, Oct 24: China's top banking watchdog warned on Tuesday that risks in the banking sector will "resurface" and lenders have to step up controls to rein in bad loans in the coming months.

Liu Mingkang, the head of the China Banking Regulatory Commission, issued the warning just as the nation's largest bank, Industrial and Commercial Bank of China (ICBC), was completing a share sale in Hong Kong and Shanghai.

"The excessive liquidity (in the banking system) and oversupply problem in some industrial sectors will persist amid a correction of growth in the global and as well as the Chinese economy," Liu said in a statement.

"The potential risks in the banking sector, which resulted from lending at times of high-speed growth, will gradually surface."

He said that for the fourth quarter it was a key task for the commercial banks to rein in non-performing loans, according to the statement posted on the regulator's website.

"Banks must continue to carry out macro control measures and keep lending growth rational," said Liu.

The non-performing loans ratio of major Chinese commercial banks eased to 7.6 per cent at the end of September from 8.9 per cent at the beginning of the year, Liu said.

It was unclear from the report exactly what financial institutions are considered "major commercial banks." The banking commission was not available for clarification.

ICBC is expected to raise some $22 billion in a dual listing in Hong Kong and Shanghai, marking the largest initial public offering ever. The bank will debut in both markets on Friday.

Liu's remarks were made public just two days after central bank deputy governor Wu Xiaoling warned that bad loans in the banking system remained a "huge and difficult" challenge.

The banks have been bailed out and cleaned up by the central government at a cost of billions of dollars.

But the concern is that if the fast growing economy slows sharply, borrowers will face a tough time paying back loans too easily given during the good times.

The mass-circulation China Daily newspaper in an editorial on Tuesday warned that the state banks still had a long road ahead on their way to becoming genuine world-class lenders.--AFP