Bank re­form poses sev­eral ques­tions, an­a­lysts say

China Daily (Canada) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@chi­

Me­dia re­ports on the deep­en­ing of mixed-own­er­ship re­form for cer­tain Sta­te­owned banks have in­ten­si­fied re­cently, but an­a­lysts said the re­sults of the re­form re­main to be seen and its pace will be slower than ex­pected.

Na­tional Busi­ness Daily, a na­tion­wide Chi­nese fi­nan­cial and eco­nomic news­pa­per, re­ported on Thurs­day that Shang Fulin, chair­man of the China Bank­ing Reg­u­la­tory Com­mis­sion, said at a re­cent­meet­ing on the cur­rent eco­nomic sit­u­a­tion that China will push for­ward the mixed-own­er­ship re­form of the bank­ing sec­tor.

An uniden­ti­fied person who is close to the bank­ing reg­u­la­tor said sub­stan­tive ac­tions will be taken in the sec­ond half of this year or the first half of 2015. At present, which bank will be­come the first to explore the re­form is not yet de­cided, the pa­per re­ported.

The CBRC re­fused to com­ment on meet­ing or the re­form.

In a pub­lic state­ment is­sued on July 28, Bank of Com­mu­ni­ca­tions Co Ltd an­nounced that it pays great at­ten­tion to the cen­tral govern­ment’s re­quire­ments on the re­form of the mixed-own­er­ship econ­omy and fi­nan­cial sys­tem.

“We are ac­tively study­ing a fea­si­ble plan to deepen the re­form of our com­pany’s mixed-own­er­ship struc­ture and im­prove the in­ter­nal ad­min­is­tra­tion sys­tem to strengthen the risk con­trol and re­spon­si­bil­ity sys­tems, as well as stim­u­late the cor­po­rate op­er­at­ing vi­tal­ity,” the bank said.

Prior to the an­nounce­ment, Reuters re­ported that the bank had sub­mit­ted an ap­pli­ca­tion for a pilot pro­gram to sell stakes to pri­vate in­vestors and is await­ing ap­proval from the govern­ment.

Ni Jun, a fi­nan­cial an­a­lyst at Shang­haibased Green­woods As­set Man­age­ment Ltd, said: “A State-owned bank will ben­e­fit from the in­tro­duc­tion of pri­vate share­hold­ers, whow­ill su­per­vise­m­an­age­men­tor give sug­ges­tions. Own­er­ship re­form will stim­u­late changes in the fi­nan­cial mar­ket, but it takes time to achieve that goal. We have not seen a fun­da­men­tal change so far.”

It is still dif­fi­cult to say whether pri­vate cap­i­tal, once it en­ters the fi­nan­cial sec­tor, will be treated the same as State-owned cap­i­tal, Ni said.

“No one knows what will hap­pen. Will pri­vate cap­i­tal­ists en­counter an im­proved man­age­ment en­vi­ron­ment in the fi­nan­cial sec­tor than in other sec­tors? Will they be forced to with­draw their money to make way for State-owned en­ter­prises just like pri­vate in­vestors for small coal mines in Shanxi province? The govern­ment must im­ple­ment com­pre­hen­sive re­form if it is sin­cere about wel­com­ing pri­vate cap­i­tal into the fi­nan­cial sec­tor,” he said.

For a large State-owned lender such as the Bank of Com­mu­ni­ca­tions, whose to­tal as­sets reached 5.96 tril­lion yuan ($967 bil­lion) by the end of 2013, it is dif­fi­cult for a pri­vate in­vestor to have real in­flu­ence on the bank’s man­age­ment un­less the in­vestor ac­quired bank stakes worth more than 100 bil­lion yuan, he said.

MuHua, bank­ing an­a­lyst of GF Se­cu­ri­ties Co Ltd, said: “Whether the own­er­ship re­form will go smoothly de­pends on whether the govern­ment wants to do it and­whether the rel­e­vant banks are will­ing to be changed by oth­ers.”

Own­er­ship re­form will not have a no­tice­able ef­fect on the banks in the short term. It may take three to five years be­fore peo­ple see im­prove­ment in the banks’ op­er­at­ing ef­fi­ciency, changes in their man­age­ment strat­egy and a rise in their share prices, she said.


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