The top 12 banks in the ranking are all foreign, with the China Merchants Bank occupying 13th place, the highest among domestic operators. The Agricultural Bank of China is the least competitive of all, the central bank report said.

Given the relative weakness of the domestic banking sector, it is not unexpected that foreign banks are the most competitive. But the fact that the "big four" lag behind other domestic rivals demands attention.

The four banks have long enjoyed preferential policies. They serve as the backbone of the country's financial system. Their lack of a competitive edge is not good news for the policy-makers, who are striving to galvanize the sector to brace for upcoming competition as China opens up its banking industry.

State support, however, is not sufficient to ensure solid growth for the banks.

The central bank report rightly pointed out that flawed corporate governance is largely to blame for their weak position. Lack of sound corporate governance has affected efficient decision-making and restricted their ability to control risk and innovate.

This is why some financial analysts remained reserved when the State pumped US$45 billion into the Bank of China (BOC) and the China Construction Bank (CCB) to improve their capital adequacy ratio early this year. In their view, without better governance, money alone will not work.

The BOC and CCB are poised to be listed on the stock market next year. This move will inspire reform of the way the banks are governed. But they, together with the other two State-owned banks, have much to do before they can compete with foreign giants.

The "big four" need to improve service quality to attract more, especially high-end, customers. In this regard the central bank report reflects the views of the public.

The banks also need to improve their profit levels. As China reforms its interest rate formation, the market will play a more vital role in deciding the rates, harming the banks' reliance on loan-deposit interest difference.

Above all, sound corporate governance is needed to steer these big vessels through the unchartered waters ahead.