The bank says it will begin designing methods to systematically grade its 40 million retail customers and cardholders for the first time.

The Shanghai bank known as Bocom, which is about 19% owned by HSBC Holdings PLC, says it wants to be among the first banks in China to apply international best practices in risk management.

"The ultimate goal is to control risks that may occur in the retail lending process," said Zhou Xiao, general manager of retail credit at Bocom and head of the project.

Analysts are looking for proof that China's banks are serious about making fundamental upgrades in lending policies. The concern is that problems lurk in the banking system but have been masked by the country's economic growth.

Another complication is the lack of a national credit-tracking system and other databases that could help loan officers predict the likelihood of defaults.

Bankers around the world are overhauling risk-management systems to comply with a complex set of guidelines dubbed Basel II, the standard that Bocom says it intends to adopt for its consumer operations.

Bocom's Mr. Zhou said his bank, which has 60,000 employees and 2,600 outlets, faces enormous challenges in designing and implementing a system that is on a par with those of international banks. He said Bocom aims to squeeze subjectivity out of lending decisions, and instead emphasize objectivity and efficiency. "We didn't have this system previously," and relied more on the instinct of bankers, Mr. Zhou said.

To propel the risk-management upgrade, Bocom is also getting help from HSBC. Not including salaries, the bank estimates its retail risk-management system will cost more than 100 million yuan, or $13 million, to develop.

Modernization is going on at other banks. Goldman Sachs Group Inc. is working with Industrial & Commercial Bank of China Ltd. on similar efforts, while Bank of America Corp. is offering expertise to China Construction Bank Corp.

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