September 20, China's banking regulator may soon start the latest round of overall assessments of city commercial banks and subsequently issue quantitative criteria for their interregional expansion, China Business News reported on Tuesday, citing unnamed sources.
"Policies for [city commercial banks'] interregional expansion are still tight," a senior executive from a city lender was quoted as saying. "The regulator will conduct assessments of banks' interregional expansion and we expect it will quantize the criteria for capital, product, risk management, corporate governance and internal control based on the Basel III requirements."
City lenders' regional expansion is still suspended, the banker said.
An executive from a Henan province-based city lender said his bank had submitted its self-assessment report to the relevant regulatory departments and approval for those banks' interregional expansion will soon be resumed -- but with stricter criteria.
According to publicly available information, more than 30 of 147 city commercial banks have expanded beyond their home provinces. Those lenders include Bank of Dalian Co. Ltd., Bank of Shanghai Co. Ltd., Bank of Hangzhou Co. Ltd, Baoshang Bank Co. Ltd. and Shengjing Bank Co. Ltd.
"City lenders can better serve small and medium-sized enterprises (SMEs) as larger banks mainly focus on big and high-end customers," Yang Bin, president of Bank of Dalian's Shanghai branch, was quoted as saying in an earlier China Business News report. "In the U.S., around 97% are small lenders and society banks."
But developing too fast could hinder banks' brand building and risk management, especially in the initial stage when they lack experience in managing a rapidly growing branch network, Yang said. City lenders could also find it hard to position themselves in the market, which could result in direct competition with nationwide big banks for large clients, he added.
At the end of 2010, China's city commercial banks had an outstanding loan balance and a deposit balance of RMB 3.6 trillion and RMB 6.1 trillion, respectively. Of the total loan balance, those advanced to SMEs amounted to RMB 1.1 trillion, an increase of 44.4% compared to the beginning of last year, according to China Banking Regulatory Commission (CBRC) data.
The non-performing loan (NPL) balance of all city lenders dropped by RMB 5.13 billion to RMB 32.56 billion at the end of 2010, when compared to the beginning of last year.
The NPL ratio decreased 0.4 percentage points to 0.9% in the same period, with the provision coverage ratio hitting 257.1% and an average capital adequacy ratio of 12.8%, according to the CBRC.
Source:21cbh