The Chinese government has authorized a US$15 billion bailout of the Industrial and Commercial Bank of China (ICBC, 中國工商銀行), China's largest but financially weakest lender, the central bank said yesterday.
"Recently the State Council has approved the share-holding reform of ICBC," the People's Bank of China said.
"Through the foreign exchange reserves, a capital injection of US$15 billion will boost the core capital adequacy ratio of the [ICBC]," said a Xinhua news agency dispatch posted on the central bank's Web site.
The long-awaited move, part of a broad program of banking reform that began more than a year ago, is aimed at boosting the state-run bank's core capital adequacy ratio (CAR) to six percent, it said.
ICBC's current 5.52 percent CAR is well below the eight percent minimum set under the Basel Accord for commercial banks, and accepted by China's banking regulator, that is a must for a potential overseas listing.
The cash injection is expected to pave the way for an eventual overseas stock offering to further shore up the bank's finances, while providing an unprecedented test of Beijing's ability to reform its troubled financial sector ahead of sector-wide liberation at the end of next year.
The handout will be financed from China's massive foreign exchange reserves, which stood at US$659.1 billion at the end of March, the central bank said.
ICBC aims to "finish its share-holding reform in 2005 and then create the conditions and seek the opportunities to gain a public listing both in domestic and overseas markets," ICBC chief Jiang Jianqing (
"Its a complicated and systematic project with high standards, a reform that we cannot afford to fail in," Jiang said.
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