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Small banks still weak in disposal of NPLs

By Li Zengxin (chinadaily.com.cn)
Updated: 2006-11-23 08:44

Related publication: Related readings:  Banks told to keep NPL ratio below 5%  Lower Q1 NPL ratio for major banks

Compared with State or big shareholding banks, smaller banks in China still lag behind in disposal of non-performing loans (NPLs), and they should do more to prevent and reduce financial risks, said a banker at the 2006 Financial Forum held in Beijing.

Jin Weihong, head of the Beijing Rural Commercial Bank, said that the country has supported the banks, especially larger banks in disposing of bad debts, by issuing a series of preferential policies and measures. Unlike bigger banks, however, small ones like his have to do the work in different ways and have been always weak in dealing with non-performing assets, mainly reflected by the undissolved burden of the historical accumulation of bad debts.

For State banks, the central government applied comprehensive methods: setting up asset management companies (AMCs), letting the banks sell their bad debts to these AMCs and twice disposing of the debts in large scales. As a result, NPL ratios at the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Bank of Communications fell down to below four percent. Small banks, on the other side, are on their own in getting rid of bad debts.

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The full text is available in the November Issue ofChina Banking.