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Chinese banks face hurdles to refinancing demands

By Wu Yiyao (China Daily)

13:22, August 07, 2012

Banks in China are facing mounting pressure to refinance as interest rate liberalization moves forward and regulators set higher risk management standards, a recent report said.

Although Chinese banks currently have sufficient capital, pressure to maintain cash flow and to refinance is increasing, according to a report by The Chinese Banker, a Beijing-based monthly publication that focuses on China's banking industry.

For many banks in China, the difference between assets and liabilities will expand in the near future because of stronger regulations and banks' growing difficulties with refinancing, the report said.

The differences for the five biggest banks in China - the Industrial and Commercial Bank of China Ltd, Agricultural Bank of China Ltd, Bank of China Ltd, China Construction Bank and Bank of Communications Co - will be equal to more than 30 billion yuan ($4.7 billion) by the end of this year, and will rise further in 2013, the report estimated.

The report based its estimation on statistics and annual reports provided by these banks, said Zhang Xiaochuan, spokeswoman for The Chinese Banker.

The difference for ICBC will rise from 60.4 billion yuan by the end of 2012 to 69.1 billion yuan in 2013, while that for the Agriculture Bank of China will go up from 63.5 billion yuan to 83.8 billion yuan.

Bank of China's will reach 37.6 billion yuan by the end of 2012 and will double in 2013, reaching 78.7 billion yuan. China Construction bank will see its difference hit 35.4 billion yuan by the end of 2012, and rise to 39.9 billion yuan in 2013, while the Bank of Communications' gap will reach 47.8 billion yuan by the end of 2012, which will further expand to 68.7 billion yuan in 2013.

Banks now remain a major source of fund-raising in China's market, and commercial banks, especially the large ones, will continue to issue more loans, which will place increasing demands on capital, according to the report.

Most of the banks face stronger risk management requirements and more pressure to raise capital, the report said.

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