By Walter Kurtz, Sober Look
Concerns about China’s banking system’s bad loan portfolios continue to surface.
China Daily: – The Chinese banking system is facing growing pressure from an increase in non-performing loans [NPLs] and an expected decline in profits in the first half of this year, due to a faster-than-expected economic slowdown as well as a narrowing net interest margin, a leading Chinese banker has warned.
Given the amount of control the authorities have over the banking system, Beijing should have no problemisolating and “removing” bad assets (a form of bank recapitalization). However, concerned about bank liquidity in the case of worsening economic conditions and rising NPLs, China Banking Regulatory Commission will be imposing new rules on the banking system. The Commission is particularly concerned about flight of deposit base such as the one faced by Spain.
Bloomberg: – China plans to retain a cap on loans at 75 percent of deposits and may add further requirements that constrain credit growth under draft rules, a senior official at the banking regulator said.
This, combined with China’s rate cuts, is capping potential profitability and putting pressure on bank shares.
|Industrial and Commercial Bank of China Ltd- A-Shares|