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The Bank of China, the nation's largest foreign
exchange bank, will reorganize itself into a joint stock company tomorrow.
The creation of the Bank of China Co Ltd, which
will take control of all of the former entity
's assets, debts, employees and business, was
approved by the bank's board of directors on Monday, according to sources
with the People's Bank of China, the nation's central bank.
The joint stock company will have a registered capital of 186.39
billion yuan (US$22.5 billion), the central bank said yesterday.
The Central Huijin Investment Co Ltd will hold 100 per cent of the
company's shares on behalf of the central government, it said.
Economists said the move suggests a major breakthrough in the
share-holding reforms of the country's major State-owned commercial banks.
Bank of China and China Construction Bank, which
won a US$45 billion bailout
from the government in late December, were chosen by the central
government as a pilot project to turn them into joint stock banks.
"Establishment of the Bank of China Co Ltd indicates a major step by
the foreign exchange bank towards a final initial public offering," said
Niu Li, a senior economist with the Beijing-based State Information
Centre.
China Construction Bank is expected to announce the establishment of a
joint stock company next month, following the splitting of the bank into
two entities.
"Chinese commercial banks will have to sharpen their competitive
abilities before foreign banks have unrestricted access to the Chinese
market at the end of 2006," Niu said.
The banks will have to lower their rates of non-performing loans, get
rid of historical financial burdens and raise their capital adequacy
levels to international standards, he said.
The country's commercial banking laws stipulate
that commercial banks' capital adequacy ratios would have to reach 8 per
cent, the minimum required by the Basel
Capital Accord
reached by international banking
managers.
"This means China's commercial banks, especially the four State-owned
banks, will have to achieve that goal before they can be listed," Niu
said.
Bank of China spokesman Zhu Min said earlier that his bank had
basically finished clearing the asset liability sheet in the first half of
this year.
During the period between January and June, the bank wrote off 108.4
billion yuan (US$13 billion) worth of non-performing assets in the loss
category.
It also sold 149.8 billion yuan (US$18 billion) worth of non-performing
loans in the doubtful category.
By the end of June, the bank's non-performing asset rate had dropped to
5.46 per cent, down from 16.29 per cent at the beginning of this year,
according to bank data.
Meanwhile, the bank managed to raise its capital adequacy rate to 8.3
per cent by issuing 14.07 billion yuan (US$1.7 billion) worth of
subordinated debt.
Zhu said that creating a clean balance sheet was just the first step in
the bank's shareholding reform efforts.
More work needs to be done to establish good corporate governance and
reform the institution's human resource management, he said.
Fellow spokesman Wang Zhaowen said the bank would usher in company
investors to hold stakes in its initial public offering.
The introduction of foreign companies as strategic investors would be
beneficial for increasing capital strength, optimizing capital structure
and diversifying the ownership of the bank, Wang said.
More importantly, foreign company investors
could bring in advanced management experiences and improve the bank's corporate governance, he
said.
(Agencies)
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Updated: 2004-08-25 13:54
