Refuting a spate of recent media reports, China's
banking regulator said yesterday that rules on equity investment by
foreign investors in local banks are unlikely to be revised by the
end of next year.
"The current ratios fit with the development level
of the market and the situation of banking institutions," an
anonymous?China Banking Regulatory Commission (CBRC) official
said.
"We will consider the possibility of adjusting the
ratios at the end of next year according to our analysis," he
added.
Any single foreign bank is allowed to take no more
than 20 percent of a Chinese bank while foreign banks are allowed
to hold no more than a combined 25 percent.
Eager to usher in foreign capital and expertise, a
number of Chinese banks are selling stakes to foreign strategic
investors ahead of planned initial public offerings. Nineteen
foreign financial institutions have so far invested a total of
US$16.5 billion in 16 Chinese banks, including State-owned lenders
and smaller banks, according to official figures.
Foreign banks, such as UBS and the Bank of America,
have been enthusiastic about buying into their Chinese
counterparts, hoping to benefit from a promising financial
market.
Recent media reports said the CBRC is considering
raising equity investment ceilings. According to Bloomberg
News, the Netherlands' ABN Amro Holding NV and France's Société
Générale SA are even teaming up with Chinese partners in bidding
for a 51 percent stake in the Guangdong Development Bank, one of
the nation's 12 national joint stock banks.
Yet a revision of the rules is unlikely in the near
term, as the CBRC is planning a systematic review of the existing
equity investments of foreign financial institutions in Chinese
banks, the official said. "Whether there needs to be any
adjustments should be decided only once we reach a conclusion after
the review."
Regarding the Guangdong bank, he said: "As to the
ratio in some individual banks, whether there is any change depends
on the individual case."
In related news, Liu Chengxiang, CBRC spokesperson,
said yesterday that Chinese banks' non-performing loans (NPLs) are
unlikely to reverse a recent trend of decline, dismissing fears
among some observers that they might rebound.
"Overall, the non-performing loans of Chinese banks
will not show any uptrend," he said. "And with the management [of
banks] improving, they are expected to continue their downward
trend."
Chinese banks have been working to reduce their
NPLs in recent years as part of efforts to improve competitiveness
before the sector is fully opened to foreign players at the end of
next year, as required by the nation's WTO commitments.
The NPL ratio of major commercial banks (the Big
Four State-owned banks and 12 national joint-stock banks that hold
69 percent of all financial assets) dropped 5.7 percentage points
in 2003 and a further 4.5 percentage points last year, said
Liu.
It shrank by 4.4 percentage points in the first
half of this year, with a total of 554 billion yuan (US$68 billion)
of bad loans cut from the banks' balance sheets.
But concerns emerged in recent months that, as the
authorities tighten controls in a few sectors that may be
overheating, a huge amount of new bad loans may be created.
Data from some joint-stock banks have shown signs
of a rebound in NPLs this year, but Liu said these fluctuations
were unlikely to reverse the overall trend.
(China Daily October 26, 2005)