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China banks must prepare for rebound in bad loans, regulator says

Published 04/20/2021, 10:54 PM
Updated 04/20/2021, 11:00 PM
© Reuters.

© Reuters.

BOAO, China, April 20 (Reuters) - China is expected to face
pressure from a rebound of non-performing loans, and banks must
fully evaluate the risk and be prepared in advance, a senior
banking regulator said on the sidelines of the Boao Forum on
Tuesday.
China has implemented monetary and fiscal policies since
last year to support an economy jolted by the COVID-19 pandemic.
Financial institutions were encouraged to lower rates for
virus-stricken firms, and relief measures were rolled out to
give borrowers breathing space during the virus crisis.
Although many small enterprises have benefited from such
policies, some companies have still suffered from the pandemic,
and adjustments to domestic and global supply chains are
expected to cause some defaults, said Xiao Yuanqi, vice chairman
of the China Banking and Insurance Regulatory Commission.
(CBIRC)
Non-performing loans of the banking sector totalled 3.6
trillion yuan ($554.06 billion) at the end of March and the bad
loan ratio stood at 1.89%, the latest CBIRC data showed.
With smaller banks more vulnerable to any sudden increase in
bad loans, the regulator will keep pushing a programme that
allows local governments to use money raised from special
government bonds to recapitalise some small lenders, Xiao said.
"The programme is effective and the pace was fast,"
according to Xiao, "We are currently ramping up efforts to carry
it out."
Xiao said in a briefing last Friday that the amount of
special bonds for capital replenishment this year "will be
relatively stable" compared with last year's figure of 200
billion yuan. "Capital replenishment is not the only thing (we focus on),"
Xiao said. "We want to improve banks' capability to prevent
risks and suffer losses, and more importantly, to help them
improve corporate governance," Xiao said.
($1 = 6.4975 Chinese yuan renminbi)

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