China's new banking commission has told banks to reduce their reliance on the government when tackling the mass of non-performing loans (NPLs).

Officials with the commission also pledged to work towards reducing the risks shadowing this critical sector.

Liu Mingkang, at his first press conference since taking the helm at the China Banking Regulatory Commission (CBRC) in March, expressed confidence in continuing the reduction of NPLs.

But he insisted commercial banks tackle the issue through enhanced internal management. Only then would they be ready to list on the stock market.

"At present, the China Banking Regulatory Commission encourages banks to explore the potential (of reducing NPLs) in the area of internal management and to strengthen credit management," the chairman told reporters.

Media reports have stated recently that many State-owned banks are preparing bond issues to raise their capital adequacy ratios. And there have been loud calls for a second transfer of NPLs at China's State-owned commercial banks to asset management companies (AMCs) to further ease their burden.

Four AMCs were established in 2000 to take over a total of 1.4 trillion yuan (US$169 billion) of NPLs from the four State-owned commercial banks - the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank and the Agricultural Bank of China.

The weighted average of NPL ratios at the four banks fell 1.99 percentage points in the first quarter of this year to 24.13 per cent. "I have the confidence to tell you that this trend will continue," Liu said.

The commission will step up supervisory and reform efforts this year to prepare the planned joint-stock restructurings of State-owned commercial banks - an intermediate stage before listings. But Liu declined to elaborate on the listing plans, citing a "one way, one bank" approach and saying there is no uniform "roadmap or timetable."

Liu added that his commission is conducting a comprehensive risk assessment of all deposit-taking financial institutions that are under CBRC administration.