The Chinese government is considering a 30 billion yuan (3.6 billion dollars) capital injection to bail out the debt-ridden Guangdong Development Bank, state media reported Monday. The People's Bank of China expects the Guangdong provincial government to inject 20 billion yuan while the central bank would contribute 10 billion to help offset the bank's "historical" liabilities, the Economic Observer said.
It would be the first time for the central government to bail out a joint stock bank, the newspaper said, citing central bank sources.
At the end of 2003, China bailed out the Bank of China and the China Construction Bank with a 45 billion dollars capital injection as part of efforts to clean up the two state-run banks ahead of reported initial public offerings sometime in 2005.
The newspaper said that Guangdong Development Bank had a high non-performing loan (NPL) ratio, low provisioning levels and a low capital adequacy ratio (CAR) which would impact its financial stability if not resolved promptly.
At the end of 2003, the Guangzhou-based bank had an NPL ratio of 22.84 percent, the highest among the country's 11 joint stock banks.
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