The move to introduce private capital into the Hangzhou City
Commercial Bank is expected to be completed by the end of this
year, a senior executive of the bank said recently.
It's said that private capital may account for over 50 percent of
the bank's share, while shares held by the government finance
department will drop to nearly 30 percent.
Meanwhile, the president of the Hangzhou City Commercial Bank
attended a Forum on National City Commercial Bank Development in
Tianjin, to deliver a speech on "how to deal with a history of
non-performing assets." The speech also alluded to new initiatives
that may be introduced after the injection of private capital.
Open to Domestic Private Capital
Statistics from the Hangzhou Branch of the ,
the country's central bank, show that government finance
departments, at the city and district levels, currently hold 61
percent of the Hangzhou City Commercial Bank's shares, which is
considered quite a significant figure even in Zhejiang where
private capital is abundant. "It has greatly influenced the market
orientation of the bank's operations," commented an industry
insider. For example, the average loan per bank client is around 10
million yuan (US$1.2 million), surpassing those of the Bank of
Communication and Guangdong Development Bank branches in the same
area. The Hangzhou Commercial Bank's loans have flowed into
large-scale projects such as municipal constructions.
"The large proportion of shares held by the government finance
department is due to historical factors," a bank executive said,
"The consolidation of city cooperative banks resulted in a large
number of non-performing assets. The government then requested
fiscal departments to buy shares in the banks to replace the bad
loans."
Currently, the rate of non-performing assets owned by the bank has
been lowered to just 1.7 percent; an amount attractive enough to
lure private capital. Throughout June and July 2002, a plan to
attract private capital was officially launched.
On
July 3, eight city commercial banks in Zhejiang Province, including
the Hangzhou City Commercial Bank, jointly announced an Action
Proclamation, saying that they will rebuild city commercial banks
as local commercial banks with a collection of mostly private
capital. The plan attracted a great deal of attention and provoked
nationwide controversy.
On
September 4, a report named Exerting the Full Play of Small and
Medium-Sized Commercial Banks, released by the Banking Supervision
Department of People's Bank of China, confirmed the actions of the
eight city commercial banks, accelerating the opening up to private
domestic capital.
Community Bank Targeted
"Registered capital has been increased from 520 million yuan (US$63
million) to 1.1 billion yuan (US$133 million)," the executive of
Hangzhou City Commercial Bank said, "Capital is not the key issue.
The introduction of private capital can promote the founding of
market-oriented management mechanism, as does the introduction of
foreign funds."
Banks have also been gaining decision-making power through the
retraction of the government's shares.
Hangzhou City Commercial Bank, which will achieve
self-determination, has now begun to make plans for its future. In
the Action Proclamation announced on July 3, eight banks brought
forward the plan to support 1,000 private enterprises. The Hangzhou
Commercial Bank, however, will aim to achieve a different set of
targets.
On
September 18, the bank declared that the reform scheme made by an
international finance consulting company had taken shape. The
scheme suggested that the bank should adopt a strategy of market
segmentation, and launch new products according to the needs of
different clients.
"We want to be a grass roots community bank," the senior executive
said, "We will adjust our policies to target private enterprises
and small to medium-sized enterprises (SMEs). The average loan per
client will be greatly reduced."
Joint-stock commercial banks that have penetrated local financial
market will take the same attitude to providing loans to bigger
projects, but the Hangzhou City Commercial Bank will adhere to a
principle of "small profits and superior sales."
"Currently, there's no bank that can meet the needs of SMEs and
evade risk at the same time, "the executive said, "but we want to
give it a go."
(china.org.cn by Tang Fuchun, October 2, 2002)