Performance targets set by the China Banking Regulatory Commission have been met by both the Bank of China (BOC) and China Construction Bank (CCB).
They were included in a pilot for joint-stock reforms at the end of last year, and the government injected a total of US$45 billion to increase their capital adequacy ratios and to lower non-performing loan (NPL) ratios.
By the end of September, the NPL ratios of the BOC and CCB were reduced to 5.16 percent and 3.84 percent respectively, while their capital adequacy ratios rose to 8.18 percent and 9.39 percent. Their ratios of appropriated funds to NPL were 68.35 percent and 87.70 percent.
In the past year, they accelerated financial restructuring and advanced company governance reform, with all major restructuring goals having now been met.
Their asset and debts quality have greatly improved: 199.3 billion yuan (US$24.08 billion) bad assets and 278.7 billion yuan (US$33.67 billion) in questionable loans were disposed of.
The BOC issued 26 billion yuan (US$3.1 billion) subordinate bonds, and CCB 23.3 billion yuan (US$2.8 billion).
A few months ago, the BOC became Bank of China Holding Co. Ltd, while CCB was divided into China Construction Bank Investment Co. Ltd and China Construction Bank Holding Co. Ltd.
Modern business practices, such as having a board of directors and supervisory committee and holding stockholders' meetings, are also now in place.
A senior official from the commission told Xinhua that both banks are approaching the average standards of leading international banks.
China's Vice Minister of Finance Lou Jiwei said that the Chinese government is prepared to inject money into the Industrial and Commercial Bank of China (ICBC) and the Agricultural Bank of China (ABC), the other two of the country's "big four" state owned banks.
He made the remark Thursday at a forum on the capital market and corporate governance, two days after Liu Mingkang, chairman of the China Banking Regulatory Commission, said the banks' reform is crucial to overhaul of the banking sector.
But Lou did not give any estimates as to when the money would be granted and how much.
If the government does hand over the funds, this will be the second bank bailout since the end of 2003, when China granted US$45 billion to the CCB and BOC.
The capital injection, Lou acknowledged, no matter in what form, will help spin off NPLs from the banks and build a new corporate governance structure.
"The Ministry of Finance is mulling this move and we hope international players will consider strategic cooperation with banks like ICBC," he said.
The government will refrain from over-regulation in pushing the banks to build up new modern corporate governance, he noted. This is because the regulator's main responsibility lies in affirming the genuineness of financial information published by companies.
ICBC and ABC have long been regarded as the weaker of China's big four state banks and are saddled with billions of dollars of NPLs.
According to relevant government figures, at the end of September, commercial banks had 1.7 trillion yuan (US$205 billion) of NPLs, increasing from 1.66 trillion yuan at the end of June.
As part of the reform to the banking system competitive before the sector is opened in early 2007, the central government hopes to make the big four commercial banks public.
(China.org.cn by Tang Fuchun, Xinhua News Agency December 4, 2004)
