Central Bank Sounds High-Risk Warnings to Rural Lenders
What’s new: China’s central bank sounded high-risk warnings to rural financial institutions in its most recent assessment of the banking system, even as the industry generally showed improvement.
The People’s Bank of China (PBOC) listed 285 rural commercial banks, cooperative banks and credit unions as high risk after assessing the risk exposure of 4,399 banking institutions nationwide in the fourth quarter of 2020.
An additional 127 smaller, village-level banks were also labeled high-risk, according to the PBOC.
The context: The 442 banking institutions listed as high risk in the latest assessment, including 30 city commercial banks, are 132 fewer than in the previous quarter and down 103 from the same period last year. Assets of the institutions account for 2% of the industry’s total.
The PBOC sorted banks into 11 levels based on risk exposure criteria. Those rated above level eight are deemed as highly risky.
The risk assessment affects institutions’ access to the central bank’s preferential credit supports, bond issuance requirements and relending quotas, among others.
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