Bank stocks tumble after warning about asset gap

Shares of two of the mainland's largest banks fell to a near two-year low yesterday after a former central bank official said that lenders of 'systematic importance' will face a financing gap of 400 billion to 500 billion yuan (HK$487 billion to HK$609 billion) in the next five years.

Wu Xiaoling, a former deputy governor at the People's Bank of China, said over the weekend that mainland banks would face substantial capital stress after the implementation of the Basel III framework, the new global banking requirements agreed by G20 leaders at the end of last year. Wu (pictured) made the remarks at the annual China Bankers Forum in Beijing, Xinhua reported.

There is no official definition of 'systematic importance', but Liao Qiang, director of financial institutions ratings at Standard & Poor's, said Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Bank of Communications, and China Merchants Bank are believed to be in that category.

Two mainland bankers said according to what they have learned from the China Banking Regulatory Committee, there is still debate on whether China Merchants Bank and Bank of Communications would qualify for the distinction.

ICBC and China Construction Bank's shares fell to their lowest point in more than two years yesterday. ICBC slid 1.24 per cent, or 6 cents, to HK$4.79. China Construction Bank dropped 1.33 per cent, or 7 cents, to HK$5.2. Shares of China Merchants Bank also came under pressure.

'The market was surprised and has overreacted to the ex-PBoC official's comments, as the figures were bigger than market expectations, and the estimates were given without a lot of details,' said Victoria Mio, a senior portfolio manager at Robeco Group,