Consolidation is in store for China's second and third tier banks as the banking sector goes through deregulation at the end of the year, Standard & Poor's have predicted. The government is likely to encourage a spate of mergers and acquisitions, particularly among the nation's 117 third-tier city commercial banks, which could lead to the creation of a number of joint stock commercial banks with nationwide coverage. Existing second-tier banks could also take over smaller operators in order to expand their coverage into new locations. Chengdu City Commercial Bank, Kunming City Commercial Bank and Qingdao City Commercial Bank are seen by S&P as prime acquisition targets.