A top Chinese banking official has given the go-ahead for the
nation's largest state-owned banks to seek strategic investors from
overseas in reforming the nation's banking system.
Liu Mingkang, chairman of the China Banking Regulatory
Commission (CBRC), told China Daily in an exclusive
interview that once the nation's state-owned commercial banks have
conditions in place for restructuring or issuing stocks, the
central government will encourage them to accept overseas funding
as well as domestic capital.
Liu said the government would "especially usher in foreign
companies as strategic investors."
China expects overseas capital to help its banks enhance their
fiscal strength, improve capital structure, optimize corporate
governance, and accelerate their interface with international
markets to incorporate management practices and concepts, the
leader of the Chinese banking industry watchdog said.
A few weeks earlier, Liu proclaimed the State Council, the
Chinese cabinet, had approved a reform plan for the banking
industry's Big Four the Industrial and Commercial
Bank of China (ICBC), the Bank of
China (BOC), the Agricultural Bank of China and the China
Construction Bank, and said it would pick "one or two" of them
for pilot reforms.
Areas covered by the reform plan include joint-stock
restructuring, further reduction in non-performing loans,
recapitalization, taking in strategic investors, and public stock
offerings.
For 2004, Liu said, the CBRC will endeavor to help the State
Council choose the State-owned commercial banks in proper condition
to attempt pilot joint-stock reform programs, and to speed up the
disposal of non-performing assets following market economy
practices.
It will also urge state-owned commercial banks to actively
explore the possibility of ushering in overseas strategic
investors, optimizing corporate governance and enhancing internal
control reforms, improving financial performance and strengthening
international competitiveness. That will occur while the State will
arrange capital replenishments in appropriate ways, he said.
In a late development, the State Council said Tuesday it had
chosen the Bank of China and China Construction Bank for pilot
joint-stock restructuring and had infused a total of US$45 billion
into the two to boost their capital adequacy ratios.
Rumors had swirled about the much-anticipated reforms. Late last
year, unconfirmed reports said two of the Big Four would list on
the Hong Kong stock exchange as early as this year.
Since its establishment last April, CBRC has been working hard
to quicken reforms of the nation's banking industry. Last
September, it started to lead an investigation the largest ever of
commercial banks
Implementation of five-category classification, and their
non-loan assets and off-balance-sheet operations.
Among other problems, inspectors have found some banks were not
strict with implementing the five-category classification, cases of
inaccurate classification, insufficient post-lending management and
weak supervision of lendings to affiliated companies, Liu said.
In the area of non-loan assets, a chronic lack of regulation has
led to various irregularities, including unauthorized acceptance of
properties as repayment of debts, postponement in the disposal of
mortgages and negligent supervision.
The official also noted the potential risk is particularly
threatening in off-balance-sheet irregularities in areas like
guarantee, commercial bill discounting and issuance of letters of
credit.
(China Daily January 7, 2004)