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National Australia Bank Comes Under Heavy Criticism

The body that oversees Australia's banking standards has issued a scathing report criticizing National Australia Bank.

The Australian Prudential Regulation Authority, or APRA, says management should have been aware sooner of irregularities in its foreign currency training operations before losses spiraled out of control.

NAB announced $US270 million in losses in January, sparking a marketplace backlash and the firing of several senior managers.

APRA Chairman John Laker told the Australian Broadcasting Corporation the Authority tried to warn the National Australia Bank Chairman as early as January of last year. "We identified serious cracks in their defenses to handle risk, we signaled our concern to senior management and took the step of writing to the chairman of the board," he says.

The APRA report accuses National Australia Bank of turning a blind eye to standard risk management procedures.

Elsewhere, China's Central Bank has announced plans to tighten credit, by raising reserve requirements for the country's banks. Many banks will soon have to increase the percentage of deposits they hold as reserves to 7.5 percent.

The move is aimed at cooling inflation fears in China's rapidly expanding economy by offsetting the amount of bank lending. Chinese authorities estimate state banks hold about $250 billion in bad loans.

Hong Kong's government has announced the territory's 64th consecutive month of deflation.

The deflation rate increased in February to two percent from 1.5 percent in January. Hong Kong authorities say housing costs showed the largest drop. Deflation is seen as a sign of weak demand, potentially signaling a declining economy.

South Korea hopes to kickstart demand by lowering a number of consumption taxes. Officials say the tax drop will apply to higher-priced consumer durables like cars, projection televisions, and air conditioners.

South Korea's Central Bank said the economy grew at 3.1 percent in 2003 - its slowest rate in six years.