Bank to acquire northeast NPLs
Plans to repackage bad debt stem from greater flexibility for financial institutions
China Development Bank is considering a plan to repackage non-performing assets worth hundreds of billions of yuan as part of Beijing's drive to revive the country's ailing northeastern provinces.
Officials from the State Council Office for Invigorating Northeast China's Industrial Bases said the plan emerged from a policy granting more flexibility to the region's financial institutions.
'It is being studied and co-ordinated with relevant government departments,' Wu Shiguo, deputy general director of the agency, said yesterday.
Mr Wu was in Hong Kong as part of an investment delegation from Heilongjiang.
The plan was first hinted at last month, when vice-minister for the agency, Song Xiaowu, said the CDB might take over regional NPLs and re-sell them at 15 to 20 per cent of book value. The bank would be empowered to acquire bad assets from regional commercial banks and state firms at a discount and bundle them for resale, greatly reducing the amount the original lenders would have to write off.
CDB announced earlier this year that it would offer a 10-year, 71.5 billion yuan line of credit for the northeast provinces of Liaoning, Heilongjiang and Jilin.
CDB officials could not be reached for comment.
Officials from the revitalising northeast China office said they were co-ordinating with local governments, the People's Bank of China and the China Banking Regulatory Commission on a more flexible policy for NPLs.
By the end of August, NPLs in the region totalled 405.33 billion yuan. Banks in the three provinces maintain a bad-debt ratio of 31.44 per cent - 16.78 percentage points higher than the national average, according to CBRC figures.
A number of pilot schemes for managing China's NPLs have emerged in recent years. The Industrial and Commercial Bank of China (ICBC) is selling NPLs worth billions of yuan back to state firms at a discount in an experiment that helps the banks write off bad debt while firms get to settle accounts.
'The variety of methods to resolve NPLs is greater and the channels to sell them increasing,' said Su Xihe, general manager of China Huarong Asset Management Corp's department overseeing the northeastern and eastern regions.
Since Huarong's establishment in 2000 to manage NPLs for ICBC, the firm has taken over 81.1 billion yuan of non-performing assets from the northeastern rust-belt. It had disposed of 21.99 billion yuan of these as of the end of July.
Mr Su said they would be taking over assets worth a 'considerable amount' from the bank soon.
