The Asia Global Payment Summit. Bali, Indonesia. 10-11 October 2019

Strong Pressure Behind Rebound in Non-performing Loans: Banking Regulator

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The China Banking Regulatory Commission has warned of a potential rebound in non-performing loans that could trigger systemic risk despite risk being “under control.”

At a press conference held on 2 March Xiao Yuanqi (肖远企), the head of CBRC’s prudential  regulatory system department warned of potential risk in the financial system despite the ostensible stability of the banking sector.

“Financial risk is currently one of the most outstanding forms of major risk,” said Xiao. “At present banking sector risk is under control and operations are stable.

“However, the financial sector risk remains at a stage where risk is highly likely to arise, and hidden risk hazards are still considerable.

Non-performing loans were at the top of the list of potential risk factors outlined by Xiao.

“The pressure behind a rebound in non-performing loans is quite large, the stock of shadow banking assets continues to be high, illicit and illegal conduct occasionally occurs, the corporate governance of some institutions is unsound, and shareholder conduit and equity regulation lacks standardisation…some of these problems are still quite severe.”

The latest data from CRBC indicates that total banking sector assets were 248 trillion yuan as of the end of January, for a year-on-year rise of 8.7%, while all loan types stood at 128 trillion yuan, for a year-on-year rise of 12.6%, outpacing asset growth.

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