China's five biggest lenders have to keep the bad loan ratio below 5 percent and boost returns after completing reforms, the country's banking regulator said in a guideline posted yesterday.

 

The country's big four state-owned lenders - Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China plus the Bank of Communications have to meet requirements to reduce bad loans, boost returns, strengthen internal risk management and keep costs down, the China Banking Regulatory Commission said in a guideline posted on its Website yesterday.

 

The five lenders have to keep returns on assets above 0.6 percent the year after restructuring and maintain a leading level in the international market three years later. The ROA level in developed countries hovers above 1 percent.

 

The requirements for return on equity were set at 11 percent the year after restructuring with an ultimate target set above 13 percent.

 

"State-owned commercial banks should aim to meet global standards and average financial indicators of the world's top 100 banks," the regulator said in the guideline.

 

Qiu Zhicheng, a Haitong Securities Co analyst, said the guideline is a continuation of the central government's plan to boost its banks.

 

Chinese financial watchdogs have accelerated the overhaul of the nation's banking sector. This includes pouring funds into bigger, healthier players and encouraging them to list shares overseas to improve corporate governance and be more competitive before the market fully opens to overseas lenders in December.

 

ICBC, China's largest bank, is preparing for an initial public offering late this year in Hong Kong after receiving a US$15 billion bailout in 2004 and selling some bad loans to an asset management company.

 

BOC, which is expected to list in Hong Kong in June, and CCB, which listed last year, received a combined US$45 billion bailout in December 2003.

 

ABC, burdened with the highest NPL ratio of the big-four, awaits a government bailout. Its NPLs dipped to 26.31 percent at the end of last year, Xinhua news agency reported earlier.

 

(Shanghai Daily May 17, 2006)