Jun 25, 2020 03:20 AM

National Auditor Warns of Hidden Bad Loan Risks for Small Banks

What’s New: Some small banks have many more bad loans than expected, China’s state auditor said following an inspection of lenders as the country increases availability of credit to bolster the virus-hit economy.

Of 43 smaller regional lenders reviewed by the National Audit Office, 16 had bad loan ratios that were nearly twice as high as the lenders publicly disclosed, the auditor found. The average bad loan ratio of the audited institutions was 2.48% as of the end of the first quarter, according to the report.

The country’s 10 largest lenders reported bad loan ratios of 1.43% on average, but the outstanding value of their unpaid loans rose 8.26% from the same time last year, the auditor said.

More to know: The state auditor also uncovered violations by lenders such as charging illegal fees and linking loan issuance to deposits. Such practices increased companies’ borrowing costs by nearly 1.8 billion yuan ($255 million), the auditor said.

Chinese regulators this year took a series of steps to encourage lenders to expand credit for small enterprises while cutting borrowing costs to support business recovery from the pandemic. Some analysts voiced concerns over bad loan risks amid the lending push and weakening economy.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Related: Exclusive: Chinese Banks Told to Shrink Loan-Loss Provisions and Lend More

Contact reporter Han Wei ( and editor Bob Simison (

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code