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ICBC sets reserves aside for possible 30% sub-prime loss

BEIJING – CHINA’S biggest bank, Industrial & Commercial Bank of China (ICBC), has set aside reserves equal to 30 per cent of its US$1.2 billion (S$1.7 billion) in sub-prime holdings to cover possible losses, a state news agency reported yesterday.

The report, if confirmed, would be the first indication that Chinese banks, which have so far avoided damage from the United States’ credit crisis, might face problems due to holdings of sub-prime mortgage securities.

ICBC chairman Jiang Jianqing disclosed the figures at a weekend meeting, the Xinhua News Agency said.

Phone calls to ICBC’s press and investor relations offices were not answered.

Chinese banks are believed to hold only modest amounts of sub-prime debt. But financial markets are watching them closely to see how they will be affected.

Last month, investors sold Chinese bank shares after a news report that the Bank of China, the country’s No. 2 lender, might record a loss for last year due to sub-prime problems. The Bank of China denied that but has yet to release details on the status of its sub-prime holdings.

Mr Jiang said ICBC’s sub-prime holdings ‘remained stable but risk reserves had been increased in the fourth quarter after supervisory departments issued warnings on a possible deterioration of the sub-prime crisis’, according to Xinhua.

The Bank of China and ICBC are believed to have China’s largest holdings of sub-prime mortgage debt.

ICBC had said earlier that it holds US$1.2 billion in sub- prime bonds, while Bank of China said in October that it had sub-prime debt valued at US$7.95 billion.

 

Source: ASSOCIATED PRESS (The Straits Times 5 Feb 08)

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