China's new banking commission has told banks to reduce their reliance on the government when tackling the mass of non-performing loans (NPLs).
Officials with the commission also pledged to work towards reducing the risks shadowing the critical sector.
Liu Minkang, in his first press conference since taking the helm at the China Banking Regulatory Commission (CBRC) in March, expressed confidence in continuing the reduction of NPLs.
But he insisted commercial banks should tackle the issue through enhanced internal controls, raised operational and technological levels and improved transparency. Only then would they be ready to list on the stock market.
"At present, the China Banking Regulatory Commission encourages banks to explore the potential (of reducing NPLs) in the area of internal management and to strengthen credit management,'' the chairman told reporters.
Media reports have stated recently that many State-owned banks are preparing bond issues to raise their capital adequacy ratios. And there have been loud calls for a second transfer of NPLs at China's State-owned commercial banks to asset management companies (AMCs) to further ease their burden.
Four AMCs were established in 2000 to take over a total of 1.4 trillion yuan (US$169 billion) of NPLs from the four State-owned commercial banks -- the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank and the Agricultural Bank of China.
The fourth quarter of that year witnessed a "turnaround'' in the battle with both the total value of NPLs and their proportion of all loans going into decline, Liu noted.
This situation has continued during the past few years as banks stepped up efforts to recover problem loans and ensure the quality of new lendings, he said.
The number has fallen by an annual average of more than 70 billion yuan (US$8.4 billion). Yet a total of 115.5 billion yuan (US$13.9 billion) of bank profits was spent in write-offs last year, he added.
The weighted average of NPL ratios at the four banks fell a further 1.99 percentage points in the first quarter of this year to 24.13 per cent.
"I have the confidence to tell you that this trend will continue,'' Liu said.
The commission, which oversees 26.5 trillion yuan (US$3.2 trillion) in value, or 85 per cent of China's financial assets, will step up supervisory and reform efforts this year to prepare the planned joint-stock restructurings of State-owned commercial banks -- an intermediate stage before listings.
The CBRC aims to bring the NPL ratio of the four banks down a further 3 to 4 percentage points this year.
Liu declined to elaborate on the listing plans, citing a "one way, one bank'' approach and saying there is no uniform "roadmap or timetable.''
Liu added that his commission is conducting a comprehensive risk assessment of all deposit-taking financial institutions that are under CBRC administration.
(China Daily May 30, 2003)
