Regulator tells banks to focus on risk, credit structure

The China Banking Regulatory Commission on Wednesday urged financial institutions to strengthen their risk management and optimize their credit structures amid slowing growth in the world’s second-largest economy.

Chinese commercial banks’ non-performing loan ratio was 0.96 percent as of June 30, with a balance of 539.5 billion yuan ($88 billion), flat compared with the end of the first quarter, according to a circular posted on the regulator’s website.

Banks must prevent a large rebound in bad loans in the remainder of the year, amid slowing growth in China, said Shang Fulin, head of the CBRC, during a meeting on Wednesday. Shang said lenders must strictly avert risks associated with wealth management products.

Chinese banks had 9.08 trillion yuan in outstanding WMPs, a high-risk, highyield alternative to bank deposits, as of June 30, the CBRC said.

The CBRC introduced rules governing WMPs at the end of March, which capped the size of so-called non-standard WMPs invested outside the interbank bond market or stock exchanges.

Shang said that the outstanding amount of such WMPs was 2.78 trillion yuan at the end of June, down 7 percent from before the new rules were introduced.

These figures constitute the first official data from the CBRC on Chinese banks’ non-standard WMPs.