Beijing Allows Postal Service To Start Making Small-Scale Loans
Financial Times
By Mure Dickie in Beijing
April 12 2006
The sprawling savings arm of China's monopoly postal service has begun making loans for the first time, a move intended to help it prepare for its transformation into the country's fifth-largest bank.
After years of delay, officials say Beijing is close to launching reform of the Postal Savings and Remittance Bureau, which has more than 36,000 branches and held Rmb1,300bn ($162bn, €134bn, £93bn) in deposits at the end of 2005.
"It should happen very soon," an official at the China Banking Regulatory Commission said yesterday.
As part of preparations for life as an independentbank, the CBRC hasgranted the postal savings bureau permission to offer small loans to rural customers on a trial basis.
Most of the bureau's income currently comes from long-standing deposits with the People's Bank of China, the central bank, on which it earns favourable interest rates.
Since 2003, officials have forced the bureau to invest new deposits in the inter-bank bond market or long-term accounts with other financial institutions as part of efforts to prepare it for a more commercial future, while banning it from lending business.
However, Liu Mingkang, CBRC head, was quoted by local media last month as saying the bureau would be turned into a "community bank making small-scale loans".
Some analysts believe the savings bureau is ill-prepared to take on lending business, since it has long been run as a cash-generating arm of the opaque State Post Bureau, also known as China Post.
The terms of the savings system's trials make clear that officials remain concerned about the risks of allowing it too free a hand. The bureau, which holds about 270m deposit accounts, is only permitted to lend money to existing rural customers in the three provinces of Fujian, Shaanxi and Hubei.
Each loan must be for less than Rmb100,000 and must not exceed 90 per cent of the value of time deposits a customer already holds with the bureau - a requirement that makes it easy to meet its goal of "effectively controlling credit risk".
While such limits mean the loans will only beattractive to customers with short-term cash-flow problems, they are intended to pave the way for more adventurous business in the future.
"We hope to cultivate a credit consciousness, strengthen the development of our staff, increase business income and improve the image of the enterprise," Tao Liming, director-general of the savings bureau, said in a report posted on China Post's news website.
The trial lending would "win the trust and understanding of regulatory departments", Mr Tao said.
He said lending in rural areas should also ease criticism of the bureau, which has long been blamed for sucking capital out of poorer rural regions where money is already too scarce.
Officials at the CBRC and China Post declined to comment on the timetable for the creation of the new Postal Savings Bank, which is likely to face strong competition for business from China's "big four" state commercial banks and foreign-invested local lenders.
By Mure Dickie in Beijing
April 12 2006
The sprawling savings arm of China's monopoly postal service has begun making loans for the first time, a move intended to help it prepare for its transformation into the country's fifth-largest bank.
After years of delay, officials say Beijing is close to launching reform of the Postal Savings and Remittance Bureau, which has more than 36,000 branches and held Rmb1,300bn ($162bn, €134bn, £93bn) in deposits at the end of 2005.
"It should happen very soon," an official at the China Banking Regulatory Commission said yesterday.
As part of preparations for life as an independentbank, the CBRC hasgranted the postal savings bureau permission to offer small loans to rural customers on a trial basis.
Most of the bureau's income currently comes from long-standing deposits with the People's Bank of China, the central bank, on which it earns favourable interest rates.
Since 2003, officials have forced the bureau to invest new deposits in the inter-bank bond market or long-term accounts with other financial institutions as part of efforts to prepare it for a more commercial future, while banning it from lending business.
However, Liu Mingkang, CBRC head, was quoted by local media last month as saying the bureau would be turned into a "community bank making small-scale loans".
Some analysts believe the savings bureau is ill-prepared to take on lending business, since it has long been run as a cash-generating arm of the opaque State Post Bureau, also known as China Post.
The terms of the savings system's trials make clear that officials remain concerned about the risks of allowing it too free a hand. The bureau, which holds about 270m deposit accounts, is only permitted to lend money to existing rural customers in the three provinces of Fujian, Shaanxi and Hubei.
Each loan must be for less than Rmb100,000 and must not exceed 90 per cent of the value of time deposits a customer already holds with the bureau - a requirement that makes it easy to meet its goal of "effectively controlling credit risk".
While such limits mean the loans will only beattractive to customers with short-term cash-flow problems, they are intended to pave the way for more adventurous business in the future.
"We hope to cultivate a credit consciousness, strengthen the development of our staff, increase business income and improve the image of the enterprise," Tao Liming, director-general of the savings bureau, said in a report posted on China Post's news website.
The trial lending would "win the trust and understanding of regulatory departments", Mr Tao said.
He said lending in rural areas should also ease criticism of the bureau, which has long been blamed for sucking capital out of poorer rural regions where money is already too scarce.
Officials at the CBRC and China Post declined to comment on the timetable for the creation of the new Postal Savings Bank, which is likely to face strong competition for business from China's "big four" state commercial banks and foreign-invested local lenders.
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