Five local commercial banks and a credit cooperative in Hunan Province will soon merge and restructure into a provincial bank, the China Business News reported yesterday.

 

The provincial government is spearheading efforts to form the new bank, which may be named Xiaoxiang Bank, the report said, without giving sources.

 

The institutions and government may hold discussions this week, but a detailed plan has yet to be worked out.

 

"The lenders have reached a common understanding on the merger and restructuring," according to a report by Hunan-based Xiaoxiang Morning Post, citing Cao Yi, an official from Xiangtan Commercial Bank, which is one of the six lenders.

 

The other five include the city commercial banks Changsha, Zhuzhou, Yueyang, Hengyang, as well as Shaoyang City Credit Cooperative.

 

No officials could be reached yesterday to confirm the news.

 

China's banking regulator encourages city commercial banks to form alliances within respective regions to improve capital strength and competitiveness.

 

The China Banking Regulatory Commission in December 2005 approved the merger of six city commercial banks and seven credit cooperatives in East China's Anhui Province, making the newly formed Huishang Bank the first regional institution created by combining local lenders.

 

At the end of last year, Jiangsu Bank was opened for business, created by a merger of 10 city commercial lenders in the region.

 

At present, Jilin and Hebei provinces are also in the process of restructuring city commercial lenders.

 

The six local lenders in Hunan began business cooperation more than a year ago.

 

In November 2005, they signed a framework agreement to cooperate in inter-bank financing, credit and billing, online banking, training and information exchanges.

 

They have also launched bank cards under unified logo.

 

(China Daily June 5, 2007)