Tang Shuangning, Vice Chairman of China Banking Regulatory Commission (CBRC), highlighted problems faced by Chinese city commercial banks and gave directions to their way ahead in his speech for the 10th anniversary of establishing these banks.

Tang diagnosed 7 symptoms demonstrated by the generally weak city commercial banks. The low capital adequacy makes it difficult to raise more fund; the poor assets quality even adds more difficulty in disposing of non-performing assets; the provision is in severe shortfall currently; the development is unbalanced geographically; the internal management and risk control are inefficient; the core competitiveness is not strong due to the weak innovation in developing services and revenue sources; more talents, especially those for management and technologies are urgently needed.

Tang suggested that overseas strategic investors be introduced to optimize the share structure. Overseas strategic investors jointed hands with 4 city commercial banks in 2004. He hoped that another 4 to 5 banks would reach the similar agreement by the end of 2005.

Tang made commitment on support to city commercial banks which practiced risk management as effectively as joint stock commercial banks with medium or above ratings for their risk management and met the requirements of the regulatory body.

He said CBRC would help these banks expand their operation beyond their location, open new offices and new business, keep innovating and explore more profits.

For those which reported poor performance on operation and management and failed to improve their risk exposure, CBRC would confine their expansion while casting closer eyes on them to prevent further risk accumulation, Tang said.

For those running under high risk, CBRC, together with the local government, would urge them to step up recovery of non-performing loans, hold those to blame responsible, and carry out necessary reshuffling.

Banks too risky to bail out had better prepare for withdrawing from the market, Tang warned.

By the end of 2004, there had been 113 city commercial banks in China whose assets totaled 1693.8 billion yuan. In terms of 5-category assets classification for bank loans, the balance of NPL valued 106.1 billion yuan. Compared with the 11.7 percent of the NPL ratio, the capital adequacy stood at 1.36 percent and the provision at 14.78 percent or 15.68 billion yuan. City commercial banks are vulnerable to risks.

By People's Daily Online