Standard & Poor's Ratings Services said Friday that a recent 15 billion US dollars capital injection into Industrial and Commercial Bank of China (ICBC) represents a further positive step by the Chinese government to resolve the legacy problems of the country's banking system.

The rating services said the injection is likely to form part of a sizable recapitalization package for ICBC, which needs to address its inadequate capitalization and a large shortfall in its loan loss provisions.

"The action reinforces Standard & Poor's belief that the Chinese government is likely to provide additional support for ICBC in the near term, "said Standard & Poor's credit analyst Rayan Tsang.

A statement by the State Council announcing the injection did not address the shortfall in loan loss provisions directly, and it is likely that the bank will receive some from of relief either directly or indirectly from the government, to address the shortfall in its loan loss provisions, said the rating services.

The statement by the State Council said the capital injection would bring ICBC's regulatory capital ratio to 6 percent, two percentage points short of the minimum requirement of 8 percent, it added. The bank plans to issue subordinated debt to bring its regulatory capital ratio above the minimum requirement. 

(Xinhua News Agency April 22, 2005)