The Chinese government is planning to recapitalize two of its
four state-owned commercial banks to prepare them for joint-stock
restructuring, Lou Jiwei, China's deputy finance minister, said on
Thursday.
Recapitalization and restructuring of the Industrial and
Commercial Bank of China (ICBC) and the
Agricultural Bank of China (ABC) follow a combined US$45 billion
capital injection into the Bank of China (BOC)
and China Construction Bank (CCB) near the
end of last year.
"(We) have got to strip off their non-performing loans and
establish corporate governance structures," Lou told a conference
on capital markets and corporate governance, which was sponsored by
the ICBC and HSBC.
Lou said the issues were being studied and gave no other details
about upcoming capital infusions. However, sources said earlier
that such plans could win final approval by the end of the
year.
Many analysts believe the move could cost the government far
more than the US$45 billion spent on the banks' peers.
The ICBC is the largest of the four state-owned banks and the
ABC -- the second largest in terms of assets -- is financially the
weakest.
Lou said that overseas financial institutions had been invited
to participate in the restructuring of the two banks as strategic
investors, which the government hopes will improve the banks'
corporate governance and management.
"I hope international consortia, banks and my foreign
counterparts will consider it from a strategic perspective," said
Lou. "The Ministry of Finance looks forward to cooperating with
potential investors."
China Banking
Regulatory Commission Chairman Liu Mingkang said at a press
conference on Wednesday that more time is needed to study the ICBC
and ABC reform plans.
However, both banks have done well in their preparations this
year, he noted, including improving their internal control and loan
approval systems.
Last year's capital injections, coupled with other reform moves
such as stripping bad loans off their balance sheets, have raised
the capital adequacy ratios for the BOC and CCB above the 8 percent
minimum requirement.
All four banks are targeting initial public offerings in the
stock market, although an IPO could be two to three years away for
the ABC, the weakest.
(China Daily December 3, 2004)