Bank of China cuts ties with economic entities

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Last updated at: (Beijing Time) Saturday, January 10, 2004

Bank of China cuts ties with economic entities

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The Bank of China, a leading State-owned bank, said Saturday it has cut ties with 1,155 economic entities it set up years ago, and disposed of 72.4 billion yuan (8.8 billion US dollars) worth of non-performing assets by the end of 2003.

Sources with the bank said the Bank of China recovered 28.9 billion yuan (3.5 billion US dollars) in cash from its domestic non-performing assets and 337 million US dollars from its overseasnon-performing assets.

The bank has canceled 35.8 billion yuan (4.3 billion US dollars)worth of bad loans and disposed of 9.6 billion yuan (1.1 billion US dollars) worth of assets used by its debtors to pay back its bank loans, a leading bank official said.

The official said the bank has lowered the ratio of non-performing assets to total assets, part of the efforts by the bankto restructure. The State Council, China's cabinet, has decided toallocate 45 billion US dollars of the nation's foreign exchange reserve to supplement the capital of the bank and China Construction Bank in a bid to make them modern banking companies, featuring sufficient capital, strict internal control, safe operations, good service and good economic returns.

The two banks are required to launch financial regrouping, solve the problem of bad assets, increase the ratio of capital sufficiency, lay a solid financial foundation, and set strict financial standards under the government's plan.

The two banks, the Industrial and Commercial Bank of China, andthe Agricultural Bank of China are China's four solely state-ownedcommercial banks, which have dominated the country's banking sector during the past several decades, but they have a high ratioof bad assets and low capital sufficiency, due to structural flawsand historical factors.

Controlling up to 70 percent of domestic market shares, the four banks were forced to take active measures to enhance their competitiveness, focusing on reducing their average non-performingloan (NPL) ratio to less than 15 percent by 2005, or an annual drop of 3-5 percentage points.

China has an additional 11 joint-stock commercial banks, more than 100 city commercial banks and thousands of rural credit cooperatives.

Source: Xinhua

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