The China Banking Regulatory Commission (CBRC) yesterday announced measures
to enhance the supervision of non-performing assets at the four State-owned
commercial banks.
It also published new rules, effective immediately, on monitoring
non-performing assets at Chinese commercial banks and an appraisal of their
efforts to reduce problem loans.
The new rules require commercial banks to report their non-performing loans
on a monthly basis, and their overall non-performing assets at each quarter, to
the CBRC, it said.
The commission said it will soon send resident representatives to the
headquarters of the four State-owned commercial banks to get "first-hand"
information on their management and reforms.
Within the commission, special posts will be set up to supervise the four
banks' loans and non-credit assets and evaluate their overall levels of risk.
China's four State-owned commercial banks - the Bank of China, China
Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank
of China - hold more than half of the nation's total loans, which stood at 17
trillion yuan (US$2 trillion) at the end of last year.
Substantial progress has been achieved in their campaign to reduce bad loans
in recent years, as banking reform accelerated to prepare them for intensifying
competition after the local market fully opens up to foreign banks in 2007, as
required by the nation's World Trade Organization commitments.
Their non-performing loans totalled 1.9 trillion yuan (US$229 billion) at the
end of last year, accounting for 20.36 per cent of their total lending, down
5.85 percentage points from one year earlier.
And the government has stepped up support for reforms within the four banks,
which all have plans to launch initial public offerings (IPOs).
Late last year, the central government injected US$45 billion of foreign
exchange reserves into the Bank of China and China Construction Bank, which were
chosen for a pilot joint-stock restructuring.
They are reportedly targeting IPOs this year of the next.
The Industrial and Commercial Bank of China, the largest of the four in terms
of assets, said last month it plans to complete its joint-stock restructuring
and prepare for a stock offering by the end of 2006.
The CBRC said earlier this year it has set targets using seven benchmark
indicators, such as the net return on equity (ROE) and cost/revenue ratio, for
the two pilot banks' to meet before 2007. The criteria was calibrated in
accordance with the average level of the world's top 100 banks.
Their non-performing loan ratios will both drop to around a healthy 4 per
cent after the ongoing restructuring ends, but the commission did not specify
when.
