Leading bank sees progress with non-performing assets

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Last updated at: (Beijing Time) Friday, December 19, 2003

Leading bank sees progress with non-performing assets

China Construction Bank, one of the country's largest banks, said Thursday it had disposed of 70.2billion yuan (8.5 billion US dollars) of non-performing assets in the first 11 months of this year.

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China Construction Bank, one of the country's largest banks, said Thursday it had disposed of 70.2billion yuan (8.5 billion US dollars) of non-performing assets in the first 11 months of this year.

The state-owned bank recovered 37.8 billion yuan (4.6 billion dollars) in assets, including 32.7 billion yuan (3.98 billion dollars) in cash.

In detail, the bank recovered loans and interest worth 24 billion yuan (2.9 billion dollars) in cash from its non-performing loans, figures from the bank show.

However, bank sources declined to reveal the value of current outstanding non-performing assets, but the bank and the Industrial and Commercial Bank of China, Bank of China and Agricultural Bank of China have combined non-performing loans (NPL) valued at more than 2 trillion yuan (242 billion dollars), which have been accumulated over several decades.

Since early this year, the four banks have lowered their ratio of NPLs by 4.8 percentage points, wiping more than 88.8 billion yuan (10.7 billion US dollars) off the NPL surplus. However as thefour banks' NPL rate stood at 21.4 percent, the task of recoveringlarge-sum bad loans remained difficult.

With the gradual opening of China's banking industry to foreignbanks, the People's Bank of China, the central bank, has required that banks lower their NPL rates to less than 15 percent before 2005. The "big four", making up about 60 percent of all banking assets in China, have speeded up efforts to write off bad debt.

The Bank of China has adopted a range of measures in risk control and asset recovery, which helped to reduce the 12-billion-yuan NPLs in four months this year. The China Construction Bank inOctober hosted an autumn fair to auction off more of its mortgage debt assets. The Industrial and Commercial Bank of China in June signed an agreement with Goldman Sachs to jointly deal with its non-performing assets.

The Chinese government is providing considerable policy backing to help banks reduce NPL rates. In April China establisheda new banking regulatory body, the China Banking Regulatory Commission (CBRC), to enhance supervision of banks and support their efforts to recover NPLs and to increase credit risk control.

Chinese officials have said China welcome foreign and domestic investors to help regroup Chinese state-owned firms and banks.

The CBRC has announced that a single foreign investor can hold up to 20 percent of shares in a joint bank, as against the previous 15 percent.

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