The Bank of China Group (BOC) has completed its reconstruction plans and it now awaits the approval of the Hong Kong Monetary Authority, according to the group's chairman and president, Liu Mingkang. The 12-member banking group - one of China's big four banks - has also taken another step towards an eventual public listing with the disclosure that a beauty parade of investment bankers will be held soon to examine proposals on the recapitalisation of the merged sister banks. That process is likely to lead to a public float of the newly merged bank, which is poised to become the biggest in Hong Kong measured by assets once the integration is completed. China is encouraging its banks to take steps to improve competitiveness and diversify risks before the mainland joins the World Trade Organisation, expected in the first quarter of next year. The move forms part of a long-overdue reform of the country's banking system which, by most indicators, is among the weakest in Asia. Beijing wants to restructure a banking sector dominated by four state banks to a more commercially oriented one. This involves giving smaller and relatively more profitable commercial banks greater leeway, with the right to list, to challenge and compete with the big four. The much smaller China Minsheng Bank is being listed next week, while other medium-sized banks - such as China Merchants Bank, China Everbright Bank and Bank of Communications - are also thought to be looking at listing. Hong Kong assets disclosed by the Bank of China Group in its annual results last year amounted to HK$844.6 billion, compared with HK$795.8 billion for the Hong Kong operation of HSBC, and HK$477 billion for Hang Seng Bank. If the mainland operations of the 12 sister banks are included in the final consolidation plans, combined assets could make the group the first HK$1 trillion bank in the SAR. The merger plan, which has already been approved by the People's Bank of China, would leave two of the sister banks - Nanyang Commercial Bank, and Chiyu Banking Corp - free to continue operating under their existing licences, Mr Liu said. 'The basic idea coming from the Bank of China head office is that we will combine the [Bank of China] Hong Kong branch plus seven commercial banks based in Hong Kong but registered in Beijing, and two locally registered banks, namely Po Sang Bank and Hua Chiao Commercial Bank. 'We will also inject our shares and rights in Nanyang Commercial Bank and Chiyu Bank together to form a big new bank.' Nanyang and Chiyu are Hong Kong-incorporated banks in which Bank of China holds undisclosed stakes through various nominees. Their status as separately operating subsidiaries within the proposed new group had been reached out of 'respect' for the wishes of minority shareholders in the two banks, Mr Liu said. 'All the 12 banks in a sense will be combined together, but Nanyang Commercial Bank and Chiyu Bank will retain their licences . . . do their business independently and will be subsidiaries of the new Bank of China Group in Hong Kong.' David Marshall, an analyst with ratings agency Fitch IBCA, said that the difference in status of the two banks was likely to prove one of form rather than substance. 'Formally, their ownership structure will be different because of the presence of minority shareholders, but I would imagine they will be fully integrated into the group's operations,' he said. Mr Marshall also said Fitch IBCA and its fellow ratings' agencies would welcome the merger for a number of reasons. 'I believe it is good for the Bank of China - both the entity in Beijing and in Hong Kong,' he said. 'The entity in Hong Kong would become more integrated, which should make it more efficient, more profitable, and better managed - which would strengthen its financial condition. 'It will also make it more transparent, which would be welcomed by us and other analysts because until now it has been difficult to analyse its performance.' Explaining the background to the merger plans, Mr Liu said yesterday after a lunch address to the General Chamber of Commerce that the restructuring was aimed at promoting the group's sustainable competitive advantages. It would also simplify the ownership structure and make it more transparent, and allow the sister banks within the group to operate under a 'unified package and design programme'. The merger would also result in 'much tougher supervision coming from the HKMA with whom the central bank in China would now work 'hand in hand' to supervise and regulate the merged bank', Mr Liu said. Costs would be reduced dramatically and the bank was confident of success because it had engaged top international intermediaries to help with the merger plans, he said. Mr Liu would not be drawn on the timing of a public float.