Banks urged to cut NPL ratios to under 5%

Updated: 2006-03-06 09:58

The country aims to have all domestic joint-stockholding commercial banks lower their nonperforming loan (NPL) ratios to under 5 percent within roughly two years, the banking regulator said Friday.

Some banks' NPL ratios continue to exceed the 5 percent target, though the overall NPL ratio for domestic joint-stockholding commercial banks fell to 4.22 percent at the end of last year from 16.62 percent at the end of 2001.

The shareholding commercial banks' outstanding loan loss reserves totaled 89.8 billion yuan (US$11.09 billion) at the end of last year, the China Banking Regulatory Commission (CBRC) said in a statement, without giving comparative figures.

As a percentage of outstanding loan loss reserves required by the regulator, the reserves totaled 80.29 percent at the end of last year, up 14.19 percentage points from the start of the year, according to the statement.

China has been encouraging its banks to reduce their nonperforming loans and improve banking practices by getting capital injections and attracting strategic foreign investors.

The country will fully open the banking sector to foreign competition by the end of this year as part of its commitments to the World Trade Organization.

CBRC said Friday it will encourage and support the commercial banks in carrying out reforms, reorganize, attract foreign strategic investors and securitize assets as ways to dispose of nonperforming assets.

The regulator also said it will focus on NPL disposal for banks with poor asset quality and reiterated it will strengthen supervision of credit management and risk controls by the banks.

China's stockholding commercial banks' outstanding nonperforming loans totaled 147.1 billion yuan at the end of last year, down from 203.5 billion yuan at the end of 2001, said CBRC.

Last month, China introduced new rules that required new domestic joint-stockholding commercial banks to have a qualified foreign strategic investor as a founding shareholder.

(Source: Shenzhen Daily/Agencies)