Beijing is pushing ahead with plans to bring its four wholly owned state banks into the world of modern banking in a bold initiative to be put forward at a landmark conference next week, sources say. The initiative will involve converting the big four banks to shareholding companies. This will help them recapitalise by allowing them to bring in outside investors to expand their capital bases to meet minimum capital-adequacy ratios set by the Bank for International Settlements, the Basle-based bank of central bankers. More importantly, it will help the banks break away from the problem of being weighed down by disproportionally high levels of bad policy loans, estimated at 20 per cent of total loans, to decaying state enterprises. The big four banks are: Agricultural Bank of China, Bank of China, Industrial and Commercial Bank of China and China Construction Bank. Sources said that a new policy bank, could be created to absorb the banks' bad policy loans and take on staff made redundant by the four banks. This would also make the state banks more attractive to outside investors. Analysts said this year's banking conference, first mentioned by economic affairs chief Zhu Rongji in Hong Kong last month, would be the most significant for the banking and financial world since Beijing launched its open-door policy in 1978. Traditionally, the November conference tends to have a narrow focus: reviewing the current year's financial performance and setting targets, including the overall and individual bank credit quotas for the new year. Unlike previous meetings which only involved banking chiefs and policy makers, this year's will also be attended by stock exchange chiefs. Although Beijing has encouraged a new generation of smaller banks such as China Merchant Bank, Citic Industrial Bank, and China Everbright Bank, to run on commercial lines, it has been cautious in transforming the big four banks, which account for the lion's share of deposits and loans. But this will change after the conference. One source said a comprehensive blueprint for changing the face of Chinese finance and banking would be put forward. It is understood the conference will discuss concrete plans to: Centralise the People's Bank of China's regulatory and supervisory powers by creating 10 regional headquarters to take over existing provincial and city branches; Abolish the annual credit quota system next year, and train banks to lend on the basis of asset-liability ratios set by the central bank; and Lower the reserve requirement from 13 per cent to 10 per cent. As the central bank encourages banking and non-banking financial institutions to operate along market-based lines, it has to strengthen regulatory and supervisory control and it believes this can be done by setting up regional headquarters. Analysts said the present system of branches reporting directly to headquarters in Beijing was too fragmented.