The State Council, China's cabinet, has authorized a joint-stock reform plan for the Industrial and Commercial Bank of China (ICBC), according to Xinhua News Agency today.

It also sanctioned the next work plan for reforms at the Bank of China (BOC) and China Construction Bank (CCB), two other of the "big four" banks. Last year, it committed US$45 billion of the country's foreign exchange reserves for their reform to be piloted.

The ICBC, China's largest bank, witnessed an almost thirty fold increase in outstanding deposits from 1984 -- when it was inaugurated -- to 2004.

Given the bank's huge size and a bad loan ratio of nearly 20 percent, the amount of capital infusion needed will be phenomenal, and the State Council has allocated US$15 billion in foreign exchange toward it.

If it follows the example of the BOC and CCB, the ICBC would treat the additional funds as new capital, while using its own accumulated capital to cover loan losses.

According to the State Council, the ICBC, having made remarkable progress in internal controls, managerial work and profit improvement, is "basically ready" for joint-stock reform.

The council called on the BOC and CCB to continue improving their managerial structures, risk-control and internal control mechanisms as well as punishing those responsible for non-performing loans.

(Xinhua News Agency April 22, 2005)