China Development Bank (CDB), the country's largest policy lender, has secured approval from the government for its plan to transform itself into a full-fledged commercial bank, sources said.
The sources, who preferred not to be named, confirmed a report by China Securities Journal that the State Council, the cabinet, has finished the review of CDB's reform plan and approved the proposal.
With the restructuring, CDB will shift to all-round business activities, including retail banking, although its advantage is likely to remain in financing big-ticket development projects, according to Yuan Lin, an analyst with BOC International Securities.
"But it is not clear how long CDB's restructuring process will take," Yuan said.
To facilitate reform of the State-owned bank, Central Huijin Investment Co Ltd, a subsidiary of China Investment Corp, will soon complete its $20 billion cash injection into the bank.
Central Huijin has finished injecting $5 billion into CDB after the two reached a formal agreement for the $20 billion injection to help the reform process, the bank said.
Calculated based on CDB's latest figures, the capital injection from Central Huijin will help the bank increase its net asset value from 158 billion yuan to 300 billion yuan or more. A commercial bank's capital reserves should, according to industry regulations, account for no less than 8 percent of its total assets.
CDB is 100 percent owned by the State Council, with the Ministry of Finance acting as the representative of the shareholder. It is still premature to predict how the equity structure will change, Yuan said, although the National Audit Office has already finished auditing CDB's accounts and determined the quality of the bank's assets.
The bank reported 2.3143 trillion yuan in total assets and 158 billion yuan in net assets in 2006, with a non-performing loan ratio at 0.72 percent.
The lender is the first of the three policy banks to undergo a commercialization reform and also a key project in the reform of China's State-owned banking system.
Source:China Daily
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