China's four major financial assets management companies, in whose business operations were found serious irregularities by the National Audit Office in 2004, are facing great pressure for further reform.

"Although those financial assets management companies have contributed tremendously to prevention of financial risks and handling non-performing assets, it's a crucial time for them to restructure," a report on the Economic Daily, China's leading economic newspaper said.

As the major state-owned commercial banks speed up their joint-stock reform for stock market debuts, relevant governmental departments are exploring ways for further reform financial asset management companies correspondingly so as to tackle their problems, the newspaper said Tuesday.

China's four asset management companies (AMCs), namely the Huarong, Great Wall, Cinda and Orient AMCs, were set up in 1999 to manage a mountain of non-performing loans transferred from China's Big Four state banks.

They had disposed of 717.42 billion yuan (about 88.5 billion US dollars) worth of bad assets, the China Banking Regulatory Commission (CBRC) reported last month. They had either recovered or written off slightly over one-fifth of the non-performing assets they held by the end of June, the banking watchdog CBRC said.

According to the report from the National Audit Office, however, the irregularities concerning the four AMCs involved 71.549 billion yuan, 13 percent of the total audited assets.

Besides, some experts also began questioning the current system under which each AMC corresponds to one state-owned commercial bank. The Great Wall company, exclusively handling the non-performing assets of the debt-laden Agricultural Bank of China (ABC), always has had the lowest rate of cash retrieving among the four AMCs, the newspaper acknowledged.

By the end of June, the Great Wall company only retrieved 23.9 billion yuan in cash, 10.43 percent of the non-performing asset it handled, while the Cinda company, exclusively handling non-performing assets of the China Construction Bank (CCB), a large part of whose loans have gone to China's booming real estate sector, retrieved 54.04 billion yuan in cash, 34.16 percent of the non-performing asset it handled, the newspaper quoted the CBRC as saying.

Recently, the Great Wall company succeeded in a purchase bid for some non-performing loans of the Industrial and Commercial Bank of China (ICBC), which used to be monopolized by the Huarong company, according to the newspaper. This shows a more competitive system concerning non-performance asset management is forming, insiders said.

The financial asset management corporations, still a new phenomenon in China's financial reform process, have obvious weakness in internal management and control, the newspaper said.

The CBRC is working on some regulatory regulations and provisions in this regard, with guidelines on duties of handling non-performing assets, regulation on information release of AMCs and provision on penalty over AMC irregularities to be promulgated soon, the newspaper said.

Both foreign-funded and Chinese privately-owned companies are interested in the non-performing asset management, which imposes further pressure upon state-owned AMCs, the newspaper said.

Source: Xinhua