China's banking supervisory body has formulated its first-ever
guidelines on regulating and developing the nation's 112 city
commercial banks.
The new rules cover key issues such as creating favorable
conditions, optimizing regulatory mechanisms and establishing an
efficient mechanism to replenish capital bases.
They are expected to accelerate reform and development of the
regional lenders, the China Banking Regulatory Commission (CBRC) said.
Such banks have made considerable progress in restructuring,
along with reducing non-performing loans and ushering in overseas
strategic investors in their nearly 10-year-old history.
That has allowed them to "demonstrate robust prospects and
vitality," a CBRC spokesman said yesterday.
But such lenders still face widespread problems such as a lack
of long-term planning and clear business orientation, as well as
geographical disparities. Financial risk in some of them is still
high.
"Such problems, to some extent, restrict the overall development
of city commercial banks," the spokesman said.
The CBRC is promoting restructure of city commercial banks, and
trying to resolve their financial risks and enhance their role in
supporting local economies and millions of small and medium-sized
enterprises.
China started to approve the establishment of joint-stock
commercial banks in 1986 in a bid to enhance competition in the
banking industry and improve financial services.
So far, 112 city commercial banks restricted to cities of
registration and 11 bigger lenders that operate nationally have
been set up.
But the four state-owned commercial banks still hold the
majority of the nation's banking assets.
Though relatively healthier than state-owned lenders, city
commercial banks are also hampered with the burdens of high bad
loan ratios and low capital adequacy, largely due to their blind
business expansion in earlier years and governmental administrative
interference.
They had an average capital adequacy ratio of 6.13 percent at
the end of last year, below the 8 percent minimum required. Their
bad loan ratios averaged 14.08 percent at the end of June as
measured by the Chinese classification standard, up from 12.85
percent six months earlier.
(China Daily November 17, 2004)