China Considers Further Bank Bailout

Thursday, May 29th 2003, 12:00 am
By: News On 6

BEIJING (AP) _ The government is considering a further bailout of China's big four state-owned banks to help reduce their huge burden of bad loans, a top regulator said Thursday.

Officials had warned that an earlier 270 billion yuan ($32.7 billion) bailout was a ``last supper'' for the banks and ordered them to take responsibility for repairing their own loan portfolios. Under the bailout, 1.4 trillion yuan ($170 billion) in bad loans were transferred to four asset management companies.

However, asked at a news briefing Thursday if another injection of capital was likely, Banking Regulatory Commission chairman Liu Mingkang said: ``We are considering this right now.''

China's legislature, the National People's Congress, approved the creation of the new regulatory body in March to take over supervision of the banking system from the People's Bank of China, the country's central bank.

Liu, former head of the Bank of China, said preparations for setting up the commission he heads were continuing despite the SARS epidemic and should be completed by the end of June.

The commission will focus initially on reducing problem loans and overseeing competitive reforms of the state-owned banks. Rural credit cooperatives, also deeply mired in debt, would also be restructured, Liu said.

China's four big state banks include the Bank of China, Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China.

Although foreign experts estimate that bad loans might account for up to half of the banks' lending, Liu said the ratio of nonperforming loans had fallen to 24 percent of total lending by the end of March. The commission has ordered the banks to cut nonperforming loans by 3 to 4 percentage points by the year's end, a move that would take up to 80 billion yuan ($9.69 billion) off their books, he said.

The special treatment often given to influential borrowers has left China's state banks laden with massive amounts of delinquent loans, but the industry is changing. Banks are under pressure to become profit-oriented as domestic markets open to foreign competition following China's entry in the World Trade Organization.

Meanwhile, the Bank of China's listed unit in Hong Kong, the city's second-largest lender, announced it has appointed a new chairman and chief executive. Managing Director He Guangbei, who is also a vice chairman and executive director of the bank, was named chief executive, succeeding Liu Jinbao. Xiao Gang, chairman of the parent Bank of China, took Liu's former position as chairman of BOC Hong Kong (Holdings) Ltd.

The bank has not announced the reason for Liu's withdrawal from BOC Hong Kong management, which was announced last week.