The State Council, China's cabinet, has authorized a joint-stock
reform plan for the Industrial and Commercial Bank of China (ICBC), according to
Xinhua News Agency today.
It also sanctioned the next work plan for reforms at the Bank of
China (BOC)
and China Construction Bank (CCB), two
other of the "big four" banks. Last year, it committed US$45
billion of the country's foreign exchange reserves for their reform
to be piloted.
The ICBC, China's largest bank, witnessed an almost thirty fold
increase in outstanding deposits from 1984 -- when it was
inaugurated -- to 2004.
Given the bank's huge size and a bad loan ratio of nearly 20
percent, the amount of capital infusion needed will be phenomenal,
and the State Council has allocated US$15 billion in foreign
exchange toward it.
If it follows the example of the BOC and CCB, the ICBC would
treat the additional funds as new capital, while using its own
accumulated capital to cover loan losses.
According to the State Council, the ICBC, having made remarkable
progress in internal controls, managerial work and profit
improvement, is "basically ready" for joint-stock reform.
The council called on the BOC and CCB to continue improving
their managerial structures, risk-control and internal control
mechanisms as well as punishing those responsible for
non-performing loans.
(Xinhua News Agency April 22, 2005)
