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 was 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.
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