China steps up monitoring of bad bank loans
Reuters, 03.25.04, 10:36 PM ET
BEIJING, March 26 (Reuters) - China is stepping up supervision of commercial banks to make them report more regularly on their bad loans, state media said on Friday.
The move was the latest by China to clean up bad debts amassed over decades of politically directed lending, and to ensure modern risk management techniques guard against bad loans in the future.
China is reforming its state-run banking sector, seen as the biggest achilles heel threatening its strong economic growth, ahead of an expected rash of IPOs and the onset of foreign competition in 2007.
From now on, the banking regulator required state-owned commercial banks to report on their non-performing loans on a monthly basis and on a wider spectrum of bad assets every quarter, the China Daily said. Most banks have previously reported on an annual basis.
New posts would also be set up within the China Banking Regulatory Commission, set up last year to oversee sector reforms, to monitor bad assets of the nation's four key state banks and evaluate their overall levels of risk, the paper said.
China's big four banks have reported progress in trimming non-performing loan ratios, but many analysts attribute much of the reduction to a spike in loan issuance to booming economic sectors in recent years.
The average bad loan ratio of Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China fell by 5.85 percentage points last year to 20.36 percent, as measured by internationally accepted standards. Western analysts say their true bad debt ratio could be as high as 40 percent.
Beijing injected a total $45 billion of state funds into Bank of China and China Construction Bank in late 2003.
The move will help them lower their bad loan ratios to around four percent ahead of planned listings aimed at putting them in better shape to compete with foreign banks, which will gain near full access to the domestic market by 2007, according to pledges made when China joined the World Trade Organisation. ($1=8.277 Yuan)
Copyright 2004, Reuters News Service
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