China bank­ing reg­u­la­tor warns of risks from over­ca­pac­ity sec­tors

The Pak Banker - - COMPANIES/BOSS -

China's bank­ing reg­u­la­tor asked joint­stock banks and city com­mer­cial lenders to con­trol ex­po­sure to in­dus­tries suf­fer­ing over­ca­pac­ity by boost­ing risk as­sess­ments and col­lat­eral val­u­a­tions, ac­cord­ing to two sep­a­rate no­tices seen by me­dia.

The coun­try's lenders have seen their non-per­form­ing loans more than dou­ble in 2015 from the pre­vi­ous year as eco­nomic growth slowed to its weak­est rate in more than two decades.

In a no­tice re­cently cir­cu­lated to joint­stock banks, the China Bank­ing Reg­u­la­tory Com­mis­sion (CBRC) asked lenders to as­sess the credit risk and po­ten­tial as­set losses that loans to bor­row­ers in sec­tors with over­ca­pac­ity posed.

A joint-stock len­der is a bank whose equity is held by a num­ber of dif­fer­ent in­vestors, which can be govern­ment-con­nected or pri­vate. In the first no­tice, the CBRC also asked banks to ac­cel­er­ate their dis­posal of non-per­form­ing loans, in­ves­ti­gate in­no­va­tive ways to han­dle bad debt and di­ver­sify their meth­ods.

At the same time, the CBRC will en­cour­age some joint-stock banks to start in­vest­ment pi­lot projects and as­set se­cu­ri­ti­sa­tion among other things in or­der to im­prove cash flows, the first no­tice said.

In a sep­a­rate no­tice seen by Reuters, the CBRC also en­cour­aged city com­mer­cial banks to tighten con­trol of risks con­nected to in­dus­tries suf­fer­ing from over- sup­ply. China's pol­i­cy­mak­ers have taken aim at over­ca­pac­ity in sec­tors such as coal and steel pro­duc­tion, be­lieved to be re­spon­si­ble for much of the coun­try's cor­po­rate debt over­hang.

The se­cond no­tice en­cour­aged city com­mer­cial lenders to list do­mes­ti­cally or abroad and in­tro­duce qual­i­fied in­vestors to raise funds.

It also sug­gested such banks set up liq­uid­ity funds. The CBRC did not im­me­di­ately re­spond to re­quests for com­ment on ei­ther no­tice.

"For firms which are hav­ing dif­fi­cul­ties, you can re­fi­nance, ex­tend pay­ment pe­ri­ods or re­struc­ture in or­der to help them get through dif­fi­cult times," said one per­son who had seen the first no­tice.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.