04-24-2005, 05:24 AM
<b>CHINA IN USD 15 BILLION BAILOUT OF LARGEST LENDER</b>
<b>SHANGHAI: The Chinese government has authorised a $15-billion bailout of Industrial and Commercial Bank of China (ICBC), the countryâs largest but financially weakest lender, the central bank said.</b>
âRecently the State Council has approved the shareholding reform of ICBC,â the Peopleâs Bank of China said. âThrough the foreign exchange reserves, a capital injection of $15 billion will boost the core capital adequacy ratio of the (ICBC),â said a Xinhua news agency dispatch posted on the central bankâs website.
The long-awaited move, part of a broad programme of banking reforms that began more than a year ago, is aimed at boosting the state-run bankâs core capital adequacy ratio (CAR) to 6%, it said.
ICBCâs current 5.52% CAR is well below the 8% minimum set under the Basel Accord for commercial banks, and accepted by Chinaâs banking regulator, that is a must for a potential overseas listing. The cash injection is expected to pave the way for an eventual overseas stock offering to further shore up the bankâs finances, while providing an unprecedented test of Beijingâs ability to reform its troubled financial sector ahead of sector-wide liberation at the end of 2006.
âIts all about the government paying the bill for the banks so a better system of multiple shareholders can be created and the historical problems of the banks can be solved,â said Zhao Xianming, financial analyst from Great Wall Securities.
<b>The handout will be financed from Chinaâs massive forex reserves, which stood at $659.1 billion at the end of March, the central bank said. ICBC aims to âfinish its shareholding reform in 2005 and then create the conditions and seek the opportunities to gain a public listing both in domestic and overseas markets,â ICBC chief Jiang Jianqing said in a statement.</b>
âIts a complicated and systematic project with high standards, a reform that we cannot afford to fail in,â Jiang said. <b>ICBC is the third of Chinaâs big four state-owned commercial banks to win a bailout by Beijing, though the amount had been expected to well exceed the $20 billion mark. In December 2003, the Bank of China and the China Construction Bank received $22.5 billion each to clean up their balance sheets and prepare them for listing.</b> The move helped boost the CARs at the two banks to around 8%, while reducing their non-performing loan (NPL) ratios to below 10%. Last year, ICBC had a non-performing loan ratio of 19%.
âThe other two banks are in a hurry to get listed so they got more money while ICBC has a couple of years before its listing and should be capable of solving part of its capital adequacy problems through profits,â said Zhao
Cheers. <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->
<b>SHANGHAI: The Chinese government has authorised a $15-billion bailout of Industrial and Commercial Bank of China (ICBC), the countryâs largest but financially weakest lender, the central bank said.</b>
âRecently the State Council has approved the shareholding reform of ICBC,â the Peopleâs Bank of China said. âThrough the foreign exchange reserves, a capital injection of $15 billion will boost the core capital adequacy ratio of the (ICBC),â said a Xinhua news agency dispatch posted on the central bankâs website.
The long-awaited move, part of a broad programme of banking reforms that began more than a year ago, is aimed at boosting the state-run bankâs core capital adequacy ratio (CAR) to 6%, it said.
ICBCâs current 5.52% CAR is well below the 8% minimum set under the Basel Accord for commercial banks, and accepted by Chinaâs banking regulator, that is a must for a potential overseas listing. The cash injection is expected to pave the way for an eventual overseas stock offering to further shore up the bankâs finances, while providing an unprecedented test of Beijingâs ability to reform its troubled financial sector ahead of sector-wide liberation at the end of 2006.
âIts all about the government paying the bill for the banks so a better system of multiple shareholders can be created and the historical problems of the banks can be solved,â said Zhao Xianming, financial analyst from Great Wall Securities.
<b>The handout will be financed from Chinaâs massive forex reserves, which stood at $659.1 billion at the end of March, the central bank said. ICBC aims to âfinish its shareholding reform in 2005 and then create the conditions and seek the opportunities to gain a public listing both in domestic and overseas markets,â ICBC chief Jiang Jianqing said in a statement.</b>
âIts a complicated and systematic project with high standards, a reform that we cannot afford to fail in,â Jiang said. <b>ICBC is the third of Chinaâs big four state-owned commercial banks to win a bailout by Beijing, though the amount had been expected to well exceed the $20 billion mark. In December 2003, the Bank of China and the China Construction Bank received $22.5 billion each to clean up their balance sheets and prepare them for listing.</b> The move helped boost the CARs at the two banks to around 8%, while reducing their non-performing loan (NPL) ratios to below 10%. Last year, ICBC had a non-performing loan ratio of 19%.
âThe other two banks are in a hurry to get listed so they got more money while ICBC has a couple of years before its listing and should be capable of solving part of its capital adequacy problems through profits,â said Zhao
Cheers. <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->