China Postal Savings Bank is slated to open business within this year and will become China's fifth largest lender after Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Construction Bank (CCB) and Agricultural Bank of China (ABC). Compared with other banks, China Postal Savings Bank, stemming from the traditional postal savings service, has its unique competitive edges but is also saddled with problems left over in the old postal system. People's Daily on August 29 carried an interview with Cai Esheng, vice chairman of China Banking Regulatory Committee (CBRC) on this new venture.
People's Daily: The idea of setting up a postal savings bank was first put forward by the People's Bank of China, China's central bank, in 1997. Would you please brief us about the progress in the nearly 10 years afterwards?
Cai Esheng: Setting up a postal savings bank, to separate the postal savings service from the main postal service, is an inevitable requirement needed to deepen reforms in China's financial and postal systems. It is also an urgent demand for the regulation of operations and developments in the postal savings service and for fending off financial risks. Like many other countries, China also underwent a long and twisting course in seeking out a right way for its postal savings system reform.
Early in 1990, the former post and telecommunications department raised the issue on the development direction and market positioning of postal savings service. In 1997, the suggestion to set up a postal savings bank was first put up by the central bank.
Since its establishment in 2003, CBRC, drawing from successful experiences in other countries and combining them with China's concrete realities, has repeatedly submitted to the State Council tentative reform plans and suggestions to accelerate the establishment of a postal savings bank.
In June 2006, approved by the State Council, CBRC gave the green light for the establishment of China Postal Savings Bank. This marks the beginning of a concrete implementation phase for the establishment of the new bank, which has attracted a lot of attention. For the whole postal sector, the reform is both a challenge and a development opportunity.
People's Daily: Compared with other traditional commercial banks, what are the advantages and disadvantages of China Postal Savings Bank?
Cai: Since it was kicked off in 1986, the postal savings service has developed into an important financial force in China. By the end of June 2006, it had notched up savings deposits of 1.516 trillion yuan (US$190.8 billion), only below that of the four state-owned commercial banks and rural credit cooperatives. Postal savings outlets have exceeded 36,000, with two thirds of them located in counties and rural areas below country level. It has become the largest financial network linking urban and rural areas. Postal savings have accumulated over 700 billion yuan (US$88.07 billion) of savings deposits under independent use.
The largest advantage of the postal savings bank lies in its vast network. In the future, the postal savings bank will take full use of this network advantage to improve its financial service functions in urban and rural areas. It will focus on retail and intermediary business and provide basic financial services to all residents. It will also create supplementary links with other commercial banks to support the construction of a "new socialist countryside" and the balanced development of urban and rural economies.
In the past, the postal savings service was managed as an internal sector of the postal system, leaving some problems for the new postal savings bank, including weak internal control and risk prevention mechanism as well as a lack of talent. These problems will restrict the development of the new bank. But, to counter this, the bank will intensify professional management. However, the above-mentioned problems will still exist in a long time.
Therefore, to be prudent, the bank will start with providing basic financial service to urban and rural residents and low-risk assets business. It will gradually expand its business portfolio through strengthening its internal management and risk control.
People's Daily: How are the preparations faring?
Cai: Preparations are in full swing. As an important precondition and guarantee of the postal savings system reform, the separation of administrative functions from enterprise management in the postal sector has been well prepared and the establishment of China Post Group will be completed before the China Postal Savings Bank is set up.
The preparation team is working on specific implementation methods and a statute for the postal savings bank. The team is also working on establishing and improving its internal rules and regulations as well as determining means of asset verification, capital verification and capital injection.
At the same time, CBRC will scientifically design the bank's corporate governance. It demands that from the outset, the bank's headquarters will set up standard boards of directors, of supervisors and senior management, as well as scientific power balances, responsibility restrictions and profit incentive mechanisms. The bank needs also to establish and improve its internal control mechanism, risk management system and scientific accounting system. Preparation works will be complemented within the year.
People's Daily: In terms of supervision, is there any difference between the postal savings bank and other banks?
Cai: After its establishment, its organs, businesses and senior managers will be subject to the banking supervision system and the bank will be subject to prudent supervision centered on capital adequacy ratio. CBRC will focus on credit, market and operation risks in the use of postal savings capital and intensify the crackdown on fraud cases. The ultimate aim is to build the postal savings bank into a modern bank with adequate capital, strict internal control, secure operation and strong competitiveness.
As two thirds of postal savings' outlets are located in counties and rural areas below country level, postal savings have become an important part of the rural financial service system. Especially in some remote areas, postal savings have become the only financial service people have access to. In order to meet rural people's increasing demand for basic financial service, the new bank's outlets in rural areas will further enrich their functions and enlarge their business.
CBRC will continue to solve the problem that postal savings have resulted in a vast outflow of rural capital and will adopt preferential supervision policies aimed at directing postal savings capital back to the countryside. On a security basis, a certain proportion of the fund will be used to address various rural issues and support the construction of the "new socialist countryside".
(China.org.cn by Yuan Fang, September 7, 2006)