The central bank governor Zhou Xiaochuan Thursday said a series of new
measures will follow the decision for acceleration of reform of debt-laden
state-owned commercial banks (SOCBs), after the government decided to allocate45
billion US dollars of the nation's foreign exchange reserve to supplement the
capital of two major banks.
Zhou made the remark here at a seminar on risk control of commercial banks.
The next-stage reform will put special focus on internal reform and
establishment of effective corporate governance mechanism of SOCBs, he said.
China's SOCBs, having made great contributions to the country'seconomic
development, are facing severe managerial problems with ahigh ratio of bad
assets and low capital sufficiency due to structural flaws and some historical
factors.
China's big four SOCBs, namely, China Construction Bank, Industrial and
Commercial Bank of China, Bank of China and Agricultural Bank of China, all have
ambitious plans to list on the stock market, but for a long time, the heavy
burdens of non-performing loans obstructed them from that goal.
The cash allocation to the two banks sent a strong signal that China will
speed up SOCB reforms, Zhou said.
China Construction Bank and Bank of China were chosen by the government for
pilot reform partly because they have already cut non-performing loans (NPL).
China Construction Bank reported the best asset quality with anNPL ratio of
11.84 percent at the end of last October, while the average NPL level of the big
four stood at 21.4 percent, 13 percentage points more than the country's 11
joint-stock commercial banks.
China has promised to open its banking business -- in all places and all
currencies -- to foreign banks by 2006. However, the SOCBs are still beleaguered
by lack of corporate governance, high NPL ratios and low capital adequacy ratio.
"This has aroused great concern from China's leadership," said Qiu Zhaoxiang,
director of the financial research institute of theUniversity of International
Business and Economics.
The Communist Party of China Central Committee has made it clear that China
will choose eligible SOCBs to conduct joint-stockreform, replenish capital in
cash and create conditions for listing.
The pilot reform would offer experience for other state-owned banks, said Wu
Xiaoqiu, a financial research fellow of the People's University of China,
predicting that the two pilot banks would list soon.
Some experts argue the 45 billion US dollars did not directly mean the
success of the reform. The key point of this round of bank reform still lies on
the improvement of internal supervision and managerial systems, said Wu.
