2010-09-20 15:45

China's five major State-owned banks have all raised their provision ratio to above 2.5 percent to cover potential non-performing loans (NPL), Reuters reported, citing the China Securities Journal.

Currently, Chinese commercial banks have bad-loan provisions of about 2.4 percent, said the China Securities Journal, quoting Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC).

From a regulatory perspective, the reserve loan ratio is quite good, Jiang said.

Banking regulators intend to set a provision ratio of 2.5 percent for smaller lenders to help strengthen supervision, the newspaper said, citing unidentified sources.

However, targets would be set only after consultations with the Ministry of Finance and after taking into consideration the banking industry's situation at the time.

By the end of June, bad-loan provisions rate for the five State-owned banks -- the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications -- was 2.39 percent, 3.15 percent, 2.26 percent, 2.49 percent, and 1.97 percent, respectively.

Current rules order banks to set aside at least 1 percent of total loans as NPL provisions by the end of the year, according to Reuters.

NPL of China's banking sector is 1.3 percent, with some joint-stock banks even below 1 percent, according to the China Securities Journal.