China Warehouse- More Than Crockery Message Board

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Strategies & Market Trends : China Warehouse- More Than Crockery

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To: RealMuLan who wrote (2595)	2/7/2004 2:34:45 PM
From: RealMuLan	Read Replies (1) of 6370

China's 'big four' banks set for new loan plan By James Kynge in Beijing Published: February 5 2004 4:00 \| Last Updated: February 5 2004 4:00 China's "big four" state banks may issue subordinated debt of up to Rmb300bn (£19.6bn) (US$36.3 billion) in the coming years to bolster their capital base as part of an emerging government strategy to turn around its insolvent banking giants. State media said yesterday that the first subordinated debt issued by the big four might be launched as early as the first quarter this year. The Industrial and Commercial Bank of China, China's largest bank, has already requested regulatory permission for the first issue, the size of which is not yet clear, the official China Daily newspaper said. Over the next two or three years, ICBC wants to raise Rmb100bn from the launch of subordinated bonds, the newspaper added. This would help to boost the bank's capital adequacy ratio to nearer the 8 per cent norm required for international banks. The decision late last year by the China Banking Regulatory Commission to let domestic banks issue subordinated debt was one strand of an initiative to bolster the quality of its banking system. It roughly coincided with the injection of a total of $45bn (£24.5bn) from China's foreign currency reserves into the China Construction Bank and the Bank of China, a measure also aimed at boosting capital adequacy in preparation for the listing of both banks in Hong Kong. Although ICBC has already applied to issue subordinated debt, it was not clear if CCB and BoC had any immediate plans to follow suit. The smaller Industrial Bank issued Rmb3bn in bonds last December and Huaxia Bank, another joint-stock lender, plans to issue Rmb4.25bn this year. Under CBRC regulations, the bonds will be issued not to retail investors but to pension funds and insurance companies. The coupon rate will be higher than that on sovereign issues. Critics of China's bank-recapitalisation plans doubted that improvements in corporate governance were keeping pace with the cash infusions that are bolstering capital-adequacy ratios. Unless the banks improve their internal controls, they may be doomed to repeat the mistakes that generated mountains of non-performing loans in the past, critics said. Official reckoning suggests that some 22 per cent of the loan portfolios of the big four is non-performing. news.ft.com

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