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Stocks: More Money for Banks
Going public on the stock market, either at home or abroad will be a feasible option for China's capital-strapped State-owned commercial banks to get replenished, a senior official said Tuesday in Beijing.
Zhou Xiaochuan, chairman of the China Securities Regulatory Commission, said initial public offerings could recapitalize the big four State commercial banks -- the Industrial and Commercial Bank of China, the China Construction Bank, the Bank of China, the Agrilcultural Bank of China.
Zhou made this remark in a speech published in Tuesday's People's Daily.
"In terms of pooling capital stock and establishing a modern enterprise system, (stock market listings) are an efficient way,'' Zhou said. But, he said, "considering the requirements on information exposure and the performance levels of listed companies, listing is a rather demanding choice and needs a series of reforms to pave the way.''
The banks would prepare by improving internal monitoring, hiring outside auditors and adopting more accommodating accounting and tax policies.
China has tried since 1997 to recapitalize its four State commercial banks to improve their capital adequacy ratio, a key barometer for their capability to reduce financial risks.
However, with the economy expanding and changing from that of the planned era, that ratio for the four banks is lower than international standards and worsens when the lending business grows fast, Zhou said.
The four banks provide 70 per cent of China's commercial banking services.
Zhou cited the ratio of the China Construction Bank, one of the big four he chaired before taking over the commission helm this year. The ratio was 5.37 per cent at the end of 1999, below the 8 per cent yardstick required by the global banking agreement Basel Concord.
He said the government's financial strength to recapitalize the State commercial banks is limited considering the lingering deficit and heavy public spending needs.
So stock market listings are a significant option. They could pool the badly needed capital money for the banks and help them better reallocate savings resources by making them more market orientated, he said.
"The participation of non-State capital would give commercial banks' operations a clearer goal, help them fend off administrative interference and is conducive to the healthy development of the financial industry,'' Zhou said.
The government could still retain a dominant stake in the banks, such as 75 per cent, to ensure its capability to weather outside impacts on the stock, he said.
Other money raised through the stock markets would come from the public. The volume of money raised from as little as 25 per cent of the shares could help the banks reach their 8-per cent capital adequacy ratio.
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