China will push all city commercial banks to fulfill the
mandated capital adequacy ratio of eight percent by the end of next
year to improve their financial strength, the nation's banking
regulator said.
Of China's more than 100 city commercial banks, 38 institutions
still fall short of the nation's capital adequacy ratio
requirement, said Tang Shuangning, vice chairman of the China
Banking Regulatory Commission, Sunday.
"City commercial banks have slowly evolved from being the ugly
ducklings of Chinese banks, but a huge amount of risk remains and
risk management needs to be stepped up at these institutions," said
Tang.
Bloomberg News reports that China's 113 city commercial
banks are less competitive than the nation's bigger banks because
they have lower capital and are confined geographically in
operations.
The government is encouraging smaller banks to bring in foreign
strategic investors or sell shares to boost their capital and fend
off competition, after overseas rivals were given unfettered access
to China's US$2 trillion?in household savings in December.
Average capital adequacy ratio at China's city banks now stands
at 8.5 percent, from negative territory five years ago, according
to Tang. Still, this measure of financial strength varies widely
among individual banks, he said.
Assets at China's city commercial banks total 2.6 trillion yuan
(US$336.5 billion) to date, from 700 billion yuan in 2000, Tang
said. The banks had profits of 18.1 billion yuan last year,
compared with 1.3 billion yuan in 2000, he added.
Chinese city commercial banks wrote off 10.6 billion yuan in
non-performing loans and received 4.2 billion yuan in capital
injections from local governments last year, said Tang. Over the
past five years, 59 Chinese city banks have written off 70 billion
yuan in bad loans, he said.
Nine city commercial banks, including Bank of Shanghai, Beijing
City Commercial Bank, and Nanjing City Commercial Bank, have sold
about US$1.2 billion worth of stakes to foreign investors so
far.
(Shanghai Daily April 2, 2007)