Caixin
Mar 08, 2017 02:32 PM
POLITICS & LAW

CBRC Asks Banks to Carry Out Credit Risk Assessments

(Beijing) — The China Banking Regulatory Commission (CBRC) has asked banks to monitor credit risks in their businesses related to loans, bonds, investments, lending to financial institutions and off-balance-sheet activities amid rising concerns over the stability of the financial system.

The inspections, including both self-assessment and monitoring by regulators, will focus on large credit risk events and identifying near-term and longer-term trigger points for such risks, according to people familiar with the matter.

Premier Li Keqiang said at the National People’s Congress gathering on Sunday that China must remain alert to non-performing loans, debt defaults and “shadow banking,” promising that China will erect a “firewall against financial risks.”

The banking regulator has also asked banks to identify risks related to off-balance-sheet activities. As regulators step up efforts to curb bad debts, Chinese banks have been increasingly using various means and asset management products to shift loans off their balance sheets to circumvent loan quotas and regulatory requirements. The CBRC has asked banks to discover any fraudulent transfer of no-performing loans, the use of bridging loans to delay exposure of risk, and the hiding of bad loans since 2014.

Specifically, banks are required to perform an assessment of any loans overdue more than 90 days and evaluate borrowers with a nonperforming loan ratio of over 100%.

The CBRC has asked banks to focus on real estate companies and other clients in industries with overcapacity that have borrowed more than 50 million yuan ($7.25 million).

Banks are required to submit their reports by the end of March to the CBRC, which will provide a credit risk report at the end of May.

CBRC data showed that by the end of 2016, Chinese commercial banks’ nonperforming loans reached 1.52 trillion yuan, or 1.74% of the total outstanding loans, rising 0.07 of a percentage point from the end of 2015. Off-balance sheet assets, including wealth management products and other business used by banks to extend loans while circumventing loan quotas and various regulatory requirements, had exceeded 40% of the banking industry’s total asset of 232 trillion yuan by the end of last year.

Guo Shuqing, the newly appointed CBRC chairman, said at a March 2 press conference that the commission will make financial-risk control a top priority this year to ensure there will not be any systemic financial risks.

Contact reporter Han Wei (weihan@caixin.com)

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