China says banks’ bad loans are high due to virus, credit risks are rising
BEIJING (Reuters) – China’s banking and insurance regulator said on Tuesday that bad debts at banks are now at a high level due to the impact of the coronavirus pandemic.
“The asset quality of small banks will also be under pressure this year, and credit risks in some institutions will continue to accumulate,” according to a statement sent by the China Banking and Insurance Regulatory Commission (CBIRC) to Reuters .
Chinese lenders have seen rising bitter debt and shrinking net interest margins, an indicator of bank profitability, amid the economic impact of a protracted pandemic.
Small businesses have been allowed to delay loan and interest repayments to help them weather the economic disruption caused by the orderly lockdown while bringing the epidemic under control in China.
The country’s largest state-backed lenders posted stable first quarter results despite the impact of the virus. But small lenders, who have fewer capital reserves and lend less to well-funded public borrowers, would be more vulnerable to the resulting economic downturn.
The NPL of the country’s 134 urban commercial banks stood at 2.49 percent at the end of March, while that of thousands of rural banking institutions stood at 4.9 percent, the CBIRC said on Tuesday. . This was higher than the industry-wide average NPL ratio of 2.04% at the end of the first quarter.
In addition, analysts believe that the actual amount of bad debt on banks’ books is much higher than advertised.
“The CBIRC will set tailor-made targets for NPL disposals based on the state of each bank and will work with tax offices, central bank and local financial regulators to expedite the process of settling NPLs,” the statement said. CBIRC.
The CBIRC settled liquidity risks at 109 high-risk rural banking institutions in 2019, the statement said. He said he would continue to address the risks of small lenders facing a liquidity shortage and urge provincial governments to be responsible for managing risk in rural banks and institutions.
The regulator also said it would continue to crack down on high-risk shadow banking to prevent their return and maintain restrictions to avoid a housing market bubble.
Reporting by Cheng Leng and Se Young Lee; Editing by Simon Cameron-Moore