中国餐行业监督管委员会 Annual Report 2010 2. Given the lax loan management in the past and the consensus that credit risk remained to be the primary risk faci the Chinese banking industry, the CBrC actively promoted the implementation of the Three Rules and One Guidelines A.e. the Provisional Rules on the Management of Fixed Assets Loans, the provisional Rules on the Management of Working Rules on the Management of Retail Loans, and the Guidelines on Project Financing)through extensive publicity programs, on-going monitoring and prompt corrective actions where necessary. These efforts were intended to prevent the misappropriation of bank loans and secure the disbursement of loans to meet the real economic demands 3. As the deliberation and debates on international regulatory reform resulted in the release of a series of new standards and requirements, the CBRC kept close abreast of the latest reform outcome by timely adjusting the Chinese banking practices to align with the new international standards with respect to capital adequacy, provisioning, leverage and 4. In view of the fast growth of lending to local government funding platforms(LGFPs)and risks triggered by unsound operation of these platforms, the CBRC actively participated in the formulation and implementation of the relevant policy decisions of the State Council, and urged banking institutions to accurately classify their loans to the LGFPs on the basis of diligent cash flow analysis. Specifically, banks are required to verify the principal party liable for loan repayment, take preemptive risk mitigation measures, draw sufficient provisions as necessary, and offset risks though prompt write- 5. With a view to the rapid increase in real estate prices in certain cities and the potential buildup of credit risks, the CBRC closely followed the call of the State Council to curb the soaring housing prices and ensure sound and stable development of real estate market. Specifically, the CBRC required banking institutions to adopt differentiated mortgage policies, carefully review and verify the purpose of mortgages as well as the borrowers'creditworthiness through residence visits and face-to-face interviews. In addition, the CBRC strengthened the supervision on lending to property developers, land reserves and real estate trust business. Particular focus was made to crack down on such rule-breaking activities as zero down payment, fraudulent mortgages, and kickback from realtors to buyers 6. Along with the national endeavors to promote economic restructuring and industrial upgrading the CBrc pledged full support to the elimination of obsolete production capacity, energy-saving and emission reduction initiatives. The BRC provided timely guidance for banking institutions on optimizing their credit structure, restricting new credit lines to high-polluting, energy-intensive and resources-dependent industries, and promptly resolving the loans already extended to these industries so as to mitigate the potential loan loss Box 2: International Banking and Financial Regulatory Reform In accordance with the goal and timetable endorsed by the G20 London Summit and Pittsburgh Summit, and with join efforts of international financial institutions and domestic regulators, substantial progress has been scored on different fronts of international financial regulatory reform Institution-based reform to improve soundness of individual financial institutions so as to strengthen the micro oundation for a stable financial system. Initiatives on this front include reform of capital rules; introduction of leverage. 24
24 Annual Report 2010 002 2. Given the lax loan management in the past and the consensus that credit risk remained to be the primary risk facing the Chinese banking industry, the CBRC actively promoted the implementation of the ‘Three Rules and One Guidelines’ (i.e. the Provisional Rules on the Management of Fixed Assets Loans, the Provisional Rules on the Management of Working Capital Loans, the Provisional Rules on the Management of Retail Loans, and the Guidelines on Project Financing) through extensive publicity programs, on-going monitoring and prompt corrective actions where necessary. These efforts were intended to prevent the misappropriation of bank loans and secure the disbursement of loans to meet the real economic demands. 3. As the deliberation and debates on international regulatory reform resulted in the release of a series of new standards and requirements, the CBRC kept close abreast of the latest reform outcome by timely adjusting the Chinese banking practices to align with the new international standards with respect to capital adequacy, provisioning, leverage and liquidity. 4. In view of the fast growth of lending to local government funding platforms (LGFPs) and risks triggered by unsound operation of these platforms, the CBRC actively participated in the formulation and implementation of the relevant policy decisions of the State Council, and urged banking institutions to accurately classify their loans to the LGFPs on the basis of diligent cash flow analysis. Specifically, banks are required to verify the principal party liable for loan repayment, take preemptive risk mitigation measures, draw sufficient provisions as necessary, and offset risks though prompt writeoffs. 5. With a view to the rapid increase in real estate prices in certain cities and the potential buildup of credit risks, the CBRC closely followed the call of the State Council to curb the soaring housing prices and ensure sound and stable development of real estate market. Specifically, the CBRC required banking institutions to adopt differentiated mortgage policies, carefully review and verify the purpose of mortgages as well as the borrowers’ creditworthiness through residence visits and face-to-face interviews. In addition, the CBRC strengthened the supervision on lending to property developers, land reserves and real estate trust business. Particular focus was made to crack down on such rule-breaking activities as zero down payment, fraudulent mortgages, and kickback from realtors to buyers. 6. Along with the national endeavors to promote economic restructuring and industrial upgrading, the CBRC pledged full support to the elimination of obsolete production capacity, energy-saving and emission reduction initiatives. The CBRC provided timely guidance for banking institutions on optimizing their credit structure, restricting new credit lines to high-polluting, energy-intensive and resources-dependent industries, and promptly resolving the loans already extended to these industries so as to mitigate the potential loan loss. Box 2: International Banking and Financial Regulatory Reform 1. Latest progress in international financial regulatory reform In accordance with the goal and timetable endorsed by the G20 London Summit and Pittsburgh Summit, and with joint efforts of international financial institutions and domestic regulators, substantial progress has been scored on different fronts of international financial regulatory reform. • Institution-based reform to improve soundness of individual financial institutions so as to strengthen the micro foundation for a stable financial system. Initiatives on this front include: reform of capital rules; introduction of leverage, Economic & Banking Developments
iquidity and dynamic provisioning standards; reform of corporate governance implementation of sound compensation scheme; the strengthening of consolidated supervision, and strengthened supervision of off-balance sheet activities Market-based reform to build up financial market infrastructure and correct market failure. Initiatives on this front include: achieving the convergence of international accounting standards; amending the risk pricing models and reducing over-reliance on model assumptions and quantitative models; enhancing supervision of credit rating agencies g excessive reliance on external ratings: reforming the oTC derivatives market by standardizing the contracts System-based reform to establish macro-prudential supervisory framework to underpin systemic risk supervision Initiatives on this front include: setting up institutional regulatory arrangements in line with macroeconomic developments and economic cycles: mitigating the positive feedback loops between the financial system and real economy: expanding the financial regulatory scope to incorporate shadow banking into the regulatory framework, strengthening the supervision of the systemically important financial institutions(SIFIs)to reduce the"too-big-to-fai moral hazards; strengthening home and host supervisory collaboration to eliminate cross-border risk spread 2. Financial reform initiatives of major economies In July 2010. the U.S. released the Dodd-Frank Wall Street Reform and Consumer Protection Act. the new act cove almost every aspect of the U.S. financial service industry and includes such key measures as: (a)Updating U.S. regulatory framework. Accordingly, the Financial Stability Oversight Council(FSOC)is to be established to oversee systemic risks authorities of the federal reserve and the associated cheeks and balances are to be further reinforced the bureau of Consumer Financial Protection(CFPB)will be set up; and the Federal Insurance Office within the U.S. Treasury will be in place to strengthen supervision of insurance industry;(b)Enhancing the micro supervision of financial institutions The excessive expansion oftoo-big-to-fail "institutions will be limited; the Volcker Rule will be introduced to restrict proprietary trading of banks: transparency of compensation in the corporate governance will be stepped up;(c) Establishing an orderly liquidation mechanism and bail-out mechanism. The SIFls will be required to submit living wills eriodically; (d)Improving financial market regulatory system. Supervision on the shadow banking will be strengthened, trading of financial derivatives be standardized, supervision of rating agencies be enhanced, investors be better protected, and residual risk of credit securitization products be clearly defined. tookos. y of the UK issued a consultation paper for its financial regulatory reform scheme after the onservative Party took office, which covered the proposals to: (a)Abolish the Financial Services Authority(FSA)ar establish a new prudential regulatory authority within the Bank of England responsible for prudential supervision over uch financial institutions as deposit-taking institutions, investment banks and insurance companies, etc ;(b) Set up the Financial Policy Committee( FPC)to strengthen coordination and communication on macro-prudential analysis so as to strengthen responsiveness against systemic risks; (c) Establish investor protection and market supervision institutions. In September 2010, the Parliament of Europe passed the Eu Financial Regulatory Reform Bill to establish a new pan- European financial regulatory architecture, featured by the establishment of three Pan-European agencies responsible for banking, insurance and securities regulation, respectively. The bill also proposed to set up the European Systematic Risk Board responsible for monitoring and alerting various risks within the European economy. Major areas of the reform include:(a)Incorporating all standardized oTC derivatives into the exchange or e-trading platform and conducting learing through the central clearing house; (b)Prohibiting"naked short selling"of products such as credit default swap(CDS);(c)Regulating hedge funds, private equity and etc, so as to strictly limit bonus levels of senior executives of banking industry and reduce risk; (d)Preparing to establish European rating agencies and place existing rating agencies such as Moodys and Fitch under the regulation of EU
25 liquidity and dynamic provisioning standards; reform of corporate governance; implementation of sound compensation scheme; the strengthening of consolidated supervision, and strengthened supervision of off-balance sheet activities. • Market-based reform to build up financial market infrastructure and correct market failure. Initiatives on this front include: achieving the convergence of international accounting standards; amending the risk pricing models and reducing over-reliance on model assumptions and quantitative models; enhancing supervision of credit rating agencies and reducing excessive reliance on external ratings; reforming the OTC derivatives market by standardizing the contracts and moving OTC derivative exposures to central counterparties or organized exchanges. • System-based reform to establish macro-prudential supervisory framework to underpin systemic risk supervision. Initiatives on this front include: setting up institutional regulatory arrangements in line with macroeconomic developments and economic cycles; mitigating the positive feedback loops between the financial system and real economy; expanding the financial regulatory scope to incorporate shadow banking into the regulatory framework; strengthening the supervision of the systemically important financial institutions (SIFIs) to reduce the “too-big-to-fail” moral hazards; strengthening home and host supervisory collaboration to eliminate cross-border risk spread. 2. Financial reform initiatives of major economies In July 2010, the U.S. released the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new act covers almost every aspect of the U.S. financial service industry and includes such key measures as: (a) Updating U.S. regulatory framework. Accordingly, the Financial Stability Oversight Council (FSOC) is to be established to oversee systemic risks; authorities of the Federal Reserve and the associated cheeks and balances are to be further reinforced. the Bureau of Consumer Financial Protection (CFPB) will be set up; and the Federal Insurance Office within the U.S. Treasury will be in place to strengthen supervision of insurance industry; (b) Enhancing the micro supervision of financial institutions. The excessive expansion of “too-big-to-fail” institutions will be limited; the Volcker Rule will be introduced to restrict proprietary trading of banks; transparency of compensation in the corporate governance will be stepped up; (c) Establishing an orderly liquidation mechanism and bail-out mechanism. The SIFIs will be required to submit living wills periodically; (d) Improving financial market regulatory system. Supervision on the shadow banking will be strengthened, trading of financial derivatives be standardized, supervision of rating agencies be enhanced, investors be better protected, and residual risk of credit securitization products be clearly defined. In July 2010, the HM Treasury of the UK issued a consultation paper for its financial regulatory reform scheme after the Conservative Party took office, which covered the proposals to: (a) Abolish the Financial Services Authority (FSA) and establish a new prudential regulatory authority within the Bank of England responsible for prudential supervision over such financial institutions as deposit-taking institutions, investment banks and insurance companies, etc.; (b) Set up the Financial Policy Committee (FPC) to strengthen coordination and communication on macro-prudential analysis so as to strengthen responsiveness against systemic risks; (c) Establish investor protection and market supervision institutions. In September 2010, the Parliament of Europe passed the EU Financial Regulatory Reform Bill to establish a new panEuropean financial regulatory architecture, featured by the establishment of three Pan-European agencies responsible for banking, insurance and securities regulation, respectively. The bill also proposed to set up the European Systematic Risk Board responsible for monitoring and alerting various risks within the European economy. Major areas of the reform include: (a) Incorporating all standardized OTC derivatives into the exchange or e-trading platform and conducting clearing through the central clearing house; (b) Prohibiting “naked short selling” of products such as credit default swap (CDS); (c) Regulating hedge funds, private equity and etc, so as to strictly limit bonus levels of senior executives of banking industry and reduce risk; (d) Preparing to establish European rating agencies and place existing rating agencies such as Moody’s and Fitch under the regulation of EU. Economic & Banking Developments
中国餐行业监督管委员会 Annual Report 2010 II. Latest developments of China's banking industry As of end-2010, China s banking sector comprises to RMB95.3 trillion; total liabilities rose by of two policy banks and China Development Bank RMB14. 4 trillion or 19.2 percent year-on-year to large RMB89.5 trillion; owner's equity grew RMB1. 4 commercial banks, 147 city commercial banks trillion or 31.2 percent to RMB5.8 trillion(se 85 rural commercial banks, 223 rural cooperative Chart 1). Changes continued to be witnessed banks, 2, 646 rural credit cooperatives(RCCs) in the market share of banking institutions as one postal savings bank, four banking assets measured by asset size (see Chart 2). Large management companies, 40 locally incorporated commercial banks, joint-stock commercial banks foreign banking institutions, 90 foreign bank and small- and medium-sized rural financial branches, 63 trust companies, 107 finance institutions postal savings bank accounted companies of corporate groups, 17 financial for 49.2 percent, 15.6 percent and 14.9 leasing companies, four money brokerage firms, percent respectively. The market shares of city 13 auto financing companies, four consumer ommercial banks urban credit cooperatives, finance companies, 349 village or township joint-stock commercial banks, small- and banks, nine lending companies and 37 rural medium-sized rural financial institutions mutual cooperatives. Overall, banking institutions postal savings bank, non-bank financial numbered 3, 769, possessing 196,000 busines titutions and foreign banks under the CBrC's outlets and 2.991 million employees jurisdiction increased by 1.06, 0.78, 0.6, 0.16 0. 24 and 0. 13 percentage point, respectively 1. Banking assets growing further In comparison, the market shares of large As of end-2010. the total assets of chinas commercial banks, policy banks plus China banking institutions increased by RMB15.8 Development Bank were down by 2.11 and 0.71 trillion or 19.9 percent on a year-on-year basis percentage points respectively from 2009 Chart 1: Total assets and liabilities of banking Chart 2: Market Share(by assets)of banking institutions (2003-2010 institutions(2003-2010 Tata assets Total labilities Unr: RMB tallon a Poly banks plus the CDB Large co banks Joint stock commercial banks Foreign bank ■出Bm洲出s!■№ nbank francis netcut
26 Annual Report 2010 II. Latest developments of China’s banking industry As of end-2010, China’s banking sector comprises of two policy banks and China Development Bank (CDB), five large commercial banks, 12 joint-stock commercial banks, 147 city commercial banks, 85 rural commercial banks, 223 rural cooperative banks, 2,646 rural credit cooperatives (RCCs), one postal savings bank, four banking assets management companies, 40 locally incorporated foreign banking institutions, 90 foreign bank branches, 63 trust companies, 107 finance companies of corporate groups, 17 financial leasing companies, four money brokerage firms, 13 auto financing companies, four consumer finance companies, 349 village or township banks, nine lending companies and 37 rural mutual cooperatives. Overall, banking institutions numbered 3,769, possessing 196,000 business outlets and 2.991 million employees. 1. Banking assets growing further As of end-2010, the total assets of China’s banking institutions increased by RMB15.8 trillion or 19.9 percent on a year-on-year basis Chart 1: Total assets and liabilities of banking institutions (2003-2010) Total assets Total liabilities Unit: RMB trillion 100 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 to RMB95.3 trillion; total liabilities rose by RMB14.4 trillion or 19.2 percent year-on-year to RMB89.5 trillion; owner’s equity grew RMB1.4 trillion or 31.2 percent to RMB5.8 trillion (see Chart 1). Changes continued to be witnessed in the market share of banking institutions as measured by asset size (see Chart 2). Large commercial banks, joint-stock commercial banks and small- and medium-sized rural financial institutions & postal savings bank accounted for 49.2 percent, 15.6 percent and 14.9 percent respectively. The market shares of city commercial banks & urban credit cooperatives, joint-stock commercial banks, small- and medium-sized rural financial institutions & postal savings bank, non-bank financial institutions and foreign banks under the CBRC’s jurisdiction increased by 1.06, 0.78, 0.6, 0.16, 0.24 and 0.13 percentage point, respectively. In comparison, the market shares of large commercial banks, policy banks plus China Development Bank were down by 2.11 and 0.71 percentage points respectively from 2009. 0% 20% 40% 60% 80% 100% 2009 2008 2010 Chart 2: Market Share (by assets) of banking institutions (2003-2010) Policy banks plus the CDB Large commercial banks Joint-stock commercial banks City commercial banks & urban credit cooperatives Foreign banks Small- and medium-sized rural financial institutions & Postal savings bank Non-bank financial institutions 2003 2007 2005 2004 2006 Economic & Banking Developments
2. Bank deposits and loans steadily rising increased RMB6. 4 trillion or 29.5 percent year- As of end-2010, the outstanding balance of on-year to RMB30.5 trillion; consumer loans rose deposits maintained by banking institutions RMB1.9 trillion or 35.5 percent year-on-year to increased by RMB12. 1 trillion or 19.8 percent RMB7.5 trillion; bill financing declined RMB9046 billion or down 37. 8 percent year-on-year to year-on-year to RMB73.3 trillion, among which RMB1.5 trillion year-end household savings deposits grew by RMB4.2 trillion or 16 percent year-on-year to RMB 3 Capital strength further improved 30.7 trillion; the corporate deposits rose RMB4 The weighted average capital adequacy ratio(CAr) trillion. The outstanding balance of loans made by end, up 0.8 percent from year-beginning In the o, trillion or 12.7 percent year-on-year to RMB25.3 of commercial banks reached 12.2 percent at ye banking institutions went up by RMB8.4 trillion or meantime, the weighted average core CAr rose 19.7 percent year-on-year to RMB50.9 trillion(see 10.1 percent, up 0.9 percent from year-beginning Chart 3), while in breakdown, short-term loans By the end of 2010, the Car of all commercial grew RMB2.5 trillion or 13. 1 percent year-on-year anks exceeded the minimum requirement of 8 to RMB17.1 trillion; the medium-to-long term loans percent (see Chart 4) Chart 3: Deposits, loans loan-to-deposit ratio Chart 4: Numbers and percentage of banks meeting (2003-2010) the CAR requirement(2003-2010 Deposis Loar●oa Number of banks meeting the standad -- Asets share UnitNumber af banks, percent 4. Asset quality further improved 5. Provisioning capacity further As of end-2010, the outstanding balance of NPls enhanced in China s banking sector stood at RMB1.24 As of end-2010, the asset impairment provisions trillion, marking a decline of RMB 169.6 billion fro set aside by commercial banks increased RMB1557 the year beginning. The NPL ratio of all banking billion from the year beginning to RMB1,03 trillion. institutions registered at 2.44 percent, 0.89 while the banks'provisioning coverage ratio rose percentage point lower than the year beginning by 64. 5 percentage points to reach 217.7 percent, With respect to commercial banks only thei exceeding 200 percent for the first time and NPLs measured by five-category loan classification indicating a strong capacity to absorb potential standards declined to RMB433.6 billion down risks(see Chart 6). The provisioning coverage by RMB73.2 billion from the year beginning ratio of large commercial banks reached 206.8 and the NPl ratio dropped to 1. 13 percent, 0.45 percent, up 61.9 percentage points from the year percentage point lower than the year beginning beginning while that of joint-stock commercial (see Chart 5) banks up 75.6 percentage points from the year beginning to 277.6 percent it&Banking Developments 27
27 4. Asset quality further improved As of end-2010, the outstanding balance of NPLs in China’s banking sector stood at RMB1.24 trillion, marking a decline of RMB169.6 billion from the year beginning. The NPL ratio of all banking institutions registered at 2.44 percent, 0.89 percentage point lower than the year beginning. With respect to commercial banks only, their NPLs measured by five-category loan classification standards declined to RMB433.6 billion, down by RMB73.2 billion from the year beginning, and the NPL ratio dropped to 1.13 percent, 0.45 percentage point lower than the year beginning (see Chart 5). 2. Bank deposits and loans steadily rising As of end-2010, the outstanding balance of deposits maintained by banking institutions increased by RMB12.1 trillion or 19.8 percent year-on-year to RMB73.3 trillion, among which the year-end household savings deposits grew by RMB4.2 trillion or 16 percent year-on-year to RMB 30.7 trillion; the corporate deposits rose RMB4.1 trillion or 12.7 percent year-on-year to RMB25.3 trillion. The outstanding balance of loans made by banking institutions went up by RMB8.4 trillion or 19.7 percent year-on-year to RMB50.9 trillion (see Chart 3), while in breakdown, short-term loans grew RMB2.5 trillion or 13.1 percent year-on-year to RMB17.1 trillion; the medium-to-long term loans Chart 4: Numbers and percentage of banks meeting the CAR requirement (2003-2010) Number of banks meeting the standard Assets share Unit:Number of banks, percent 300 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% increased RMB6.4 trillion or 29.5 percent yearon-year to RMB30.5 trillion; consumer loans rose RMB1.9 trillion or 35.5 percent year-on-year to RMB7.5 trillion; bill financing declined RMB904.6 billion or down 37.8 percent year-on-year to RMB1.5 trillion. 3. Capital strength further improved The weighted average capital adequacy ratio (CAR) of commercial banks reached 12.2 percent at yearend, up 0.8 percent from year-beginning. In the meantime, the weighted average core CAR rose to 10.1 percent, up 0.9 percent from year-beginning. By the end of 2010, the CAR of all commercial banks exceeded the minimum requirement of 8 percent (see Chart 4). 5. Provisioning capacity further enhanced As of end-2010, the asset impairment provisions set aside by commercial banks increased RMB155.7 billion from the year beginning to RMB1,03 trillion, while the banks’ provisioning coverage ratio rose by 64.5 percentage points to reach 217.7 percent, exceeding 200 percent for the first time and indicating a strong capacity to absorb potential risks (see Chart 6). The provisioning coverage ratio of large commercial banks reached 206.8 percent, up 61.9 percentage points from the year beginning, while that of joint-stock commercial banks up 75.6 percentage points from the year beginning to 277.6 percent. Economic & Banking Developments Chart 3: Deposits, loans & loan-to-deposit ratio (2003-2010) 80 70 60 50 40 30 20 10 0 78% 76% 74% 72% 70% 68% 66% 64% 62% 60% 2003 2004 2005 2006 2007 2008 2009 2010 Deposits Loans Loan-to-deposit ratio Unit: RMB trillion, percent
中国餐行业监督管委员会 Annual Report 2010 Chart 5: NPL balance and ratio of commercial Chart 6: Asset impairment provisions and provisioning banks(2007-2010) coverage ratio of commercial banks(2007-2010) NP balance -e-NPL ratio Unit: RMB 100 milian, percent i Asset impairment prmvaors -o-Proveioning coverage ratio Unit: RMB 100 million, percent 2000 6. Profitability on the rise 7. Liquidity on moderate decline In 2010, China s banking industry realized an after- As of end-2010, the liquidity ratio of the banking tax profit of RMB899. 1 billion, representing a year- industry declined by 2. 1 percentage points from on-year increase of 34.5 percent. The RoE went up the year beginning to 43.7 percent (see Chart by 1.26 percent points from the year beginning to 8). The loan-to-deposit ratio was down by 0. 1 register at 17.5 percent, while the roa was up by percentage point from the year beginning to 69.4 percent. The RMB-denominated excess same period. In breakdown of revenue structure reserve ratio of commercial banks declined by 0.6 net interest income investment returns and fee. percentage point from the year beginning to 3.2 based income remained the top three major sources of banks' income(see Chart 7) Chart 7: Income structure of banking Chart 8: Liquidity condition of banking nstitutions(2010) institutions(December 2009 to December 2010) Net interest ncome Net fee-base
28 Annual Report 2010 6. Profitability on the rise In 2010, China’s banking industry realized an aftertax profit of RMB899.1 billion, representing a yearon-year increase of 34.5 percent. The ROE went up by 1.26 percent points from the year beginning to register at 17.5 percent, while the ROA was up by 0.09 percentage point to 1.03 percent during the same period. In breakdown of revenue structure, net interest income, investment returns and feebased income remained the top three major sources of banks’ income (see Chart 7). 7. Liquidity on moderate decline As of end-2010, the liquidity ratio of the banking industry declined by 2.1 percentage points from the year beginning to 43.7 percent (see Chart 8). The loan-to-deposit ratio was down by 0.1 percentage point from the year beginning to 69.4 percent. The RMB-denominated excess reserve ratio of commercial banks declined by 0.6 percentage point from the year beginning to 3.2 percent. Chart 5: NPL balance and ratio of commercial banks (2007-2010) NPL balance NPL ratio Unit: RMB 100 million, percent 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 8% 6% 4% 2% 0% 2007 2008 2009 2010 Chart 6: Asset impairment provisions and provisioning coverage ratio of commercial banks (2007-2010) Asset impairment provisions Provisioning coverage ratio Unit: RMB 100 million, percent 20,000 16,000 12,000 8,000 4,000 0 250% 200% 150% 100% 50% 0% 2007 2008 2009 2010 Chart 7: Income structure of banking institutions (2010) Net interest income Net fee-based income Investment returns Others 66% 12% 1% 21% Chart 8: Liquidity condition of banking institutions (December 2009 to December 2010) 50% 45% 40% 35% 30% 09.12 1 2 3 4 5 6 7 8 9 10 11 12 Economic & Banking Developments