Standard Chartered Bank will be cautious about investing in China's four major commercial banks because they have yet to resolve their non-performing loans (NPL) problem, chief executive Mervyn Davies said.

Until the NPL problem is resolved, we will continue to be cautious towards investing in them,?Davies told a press briefing.

Davies said China Banking Regulatory Commission chairman Liu Mingkang had signalled that the mainland would reform its banking sector and deal with the NPL problem.

Liu (Mingkang) is a very capable person and I think the problem will be resolved eventually,?he said.

Commission vice chairman Tang Shuangning said that this month China would introduce foreign strategic investors to the big four state commercial banks to diversify their equity structures as the mainland allows them to list shares in overseas stock markets.

Separately, Davies confirmed Standard Chartered had filed an application to become a clearing bank for yuan transactions in Hong Kong.

The international community views China's granting of rights for banks in Hong Kong to do retail renminbi business as a very positive move ... because it fosters increasing cooperation between Hong Kong and China,?he said.

Davies reiterated that the bank was looking closely at incorporating its Hong Kong operation in the territory to be eligible for preferential treatment under the Hong Kong-China Closer Economic Partnership Arrangement.

It currently runs the Hong Kong operation as a foreign-incorporated bank.

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