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4. Reform of small- and medium-sized commercial banks leading to enhanced resilience

In 2009, small- and medium-sized commercial banks continued their reforming efforts to strengthen their corporate governance, risk management and sustainable development capability. Such efforts led to notably improved resilience of these banks. As of end-2009, the average CAR of joint stock commercial banks and city commercial banks were 10.3 percent and 13 percent respectively, illustrating the substantial improvement of their financial strength. The NPL ratio and stock of small- and medium-sized commercial banks were reported at 0.95 percent and RMB63.72 billion respectively, both at the lowest level in history. The provisioning coverage ratios of joint stock commercial banks and city commercial banks reached 202 percent and 182.28 percent respectively, both at a record high level.

Urban credit cooperatives (UCCs) and city commercial banks also made breakthroughs in shaking off their historical burdens. By the end of 2009, the number of UCCs was reduced from 37 to 11, and some city commercial banks, such as the Zhuhai Commercial Bank, Jinshang Commercial Bank, Kelamayi Commercial Bank, have completed their NPLs disposal and corporate restructuring.

5. Reform and development of rural financial institutions making substantial progress

The year 2009 also witnessed the substantial progress in the reform and development of rural financial institutions. A total of 43 rural commercial banks and 196 rural cooperative banks were incorporated in 2009. Among them, 6 banks located in Wuhan, Ma’anshan, Chengdu, Guangzhou, Dongguan and Jiangnan were approved to commence business. At the same time, breakthroughs were made in allowing cross-region equity investment and branching. Accordingly, 4 rural commercial banks in Jiangsu province invested a total of RMB420 million into 7 RCCs and rural cooperative banks headquartered in other cities of the province. The rural commercial banks in Jiangsu province opened 16 inter-city branches within the province and 2 branches outside the province, those in Anhui province opened 3 inter-city branches within the province, and those in Tianjin opened 2 branches outside the city. 

Progress was also witnessed in disposing of the NPLs. Rural credit cooperatives in Guangzhou, Shunde, Chengdu and Wuhan successfully disposed of RMB18.2 billion worth of NPLs during their corporate restructuring process, and their practices exemplified the success of experiments in using market approaches to resolving the NPLs.

Continuous development of new-type rural financial institutions
The CBRC made further efforts to develop new-type rural financial institutions, with the latter continuing to grow in 2009 both in number and geographical coverage. During 2009, the pilot program of promoting the new-type rural financial institutions made further progress as summarized below.

1. The General Working Plan for New-type Rural Financial Institutions (2009-2011) was drafted. According to the plan, additional 1,300 institutions are to be established around the country with the priority being given to the under-banked regions in central and western China. It is expected that the new rural financial institutions will supplement the existing institutions to accomplish the ‘inclusive finance‘ in rural China in the next three years. 

2. By drawing upon the experience of the past three years in developing new-type rural financial institutions, the CBRC has announced an array of policies to emphasize the requirement for the rural financial institutions to stick to their market niche, enhance their risk management and maintain safe and sound operations. Meanwhile, the CBRC encouraged large- and medium-sized commercial banks to invest in the rural financial institutions.

3. The CBRC revised the Provisional Rules Governing Lending Companies, which signified the lending companies’ broadened access to financing. As a result of these and other supportive policies, a total of 172 new-type rural financial institutions were incorporated by the end of 2009, including 148 village and township banks, 8 lending companies and 16 rural mutual cooperatives. These institutions received RMB7 billion in equity capital and RMB26.9 billion in deposits, and made a total of RMB18.1 billion worth of loans. Among the loans, RMB6.6 billion was disbursed to 51,000 rural households and RMB9.1 billion was disbursed to 5,000 rural small businesses, respectively accounting for 36.5 percent and 50.3 percent of the total loans disbursed.

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