Bank of Communications to receive capital from government

A source said the threat of seizing control over lender prompted China’s Ministry of Finance move.

The China Business News (CBN), citing an unknown industry insider, reported that the government agency is considering injecting capital into the Bank of Communications through directional add-issuance, but the amount of the injection is not yet known.

According to the third-quarter report for 2009 from the Bank of Communications, the Ministry of Finance is the bank's biggest shareholder. The ministry holds 12.98 billion shares, accounting for 26.48 percent of the total. HSBC is second to the ministry in terms of shareholders. HSBC held 19.15 percent of the Bank of Communications shares as of Sept 30, 2009. The National Council for Social Security Fund held 11.34 percent of the bank's shares, according to a report in China Daily.

Guo Tianyong, director of the China Banking Research Center of the Central University of Finance and Economics, told CBN that the State-controlled shares of the Bank of Communications accounted for a relatively small quota, and that HSBC might replace the central government as the Chinese bank’s largest shareholder if it continued to increase its holdings.

The State-controlled shares would have to be increased to more than 50 percent to ensure the government’s absolute control of the bank, Guo said.