CBIRC Hopes to Accelerate Disposal of Bad Assets with Bundle Transfers of Personal NPL’s

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The China Banking and Insurance Regulatory Commission (CBIRC) plans to add another channel for the disposal of bad assets with the launch of trials for the bundle transfer of personal non-performing loans (NPL’s).

CBIRC recently issued the “Notice Concerning the Undertaking of Non-performing Loan Transfer Trials (Draft for Solicitation of Opinions)” (关于开展不良贷款转让试点工作的通知(征求意见稿)) as well as the “Bank Non-performing Loan Transfer Trial Implementation Plan” (银行不良贷款转让试点实施方案).

The new directives outline trials for the bundle transfer of personal NPL’s, with sources saying this marks a major breakthrough when it comes to channels for the disposal of bad debt in China, as well as presages an acceleration in disposal efforts.

The Implementation Plan outlines the loosening of restrictions on NPL disposal in two specific areas:

  • Gradual loosening of the regional restrictions on the NPL’s that can be handled by local asset management companies (AMC);
  • Banks will be able to transfer single corporate loans and bundle transfer personal NPL’s to both national and local AMC’s, with personal loans including personal consumer loans, mortgage loans, auto consumer loans, credit card overdrafts and personal business loans.

All six of the big state-owned Chinese banks will participate in the trial, as well as 12 joint-stock banks, the four main AMC’s in China, qualified local AMC’s and five banking sector asset investment companies (AIC’s).

“The trials will on the one hand diversify disposal channels for non-performing assets in the banking sector and reduce NPL disposal pressure,” said Lou Feipeng (娄飞鹏), a researcher from the Postal Savings Bank of China (PSBC).

“On the other hand it will also spur the banking sector to engage in the standardised, transparent disclosure of asset quality conditions, which will be of benefit to helping the healthy development of the sector.

“At the same time it’s also positive for AMC’s and other institutions that can accept transfers of NPL’s.”

“At present NPL transfer trial work is still at the stage of research and preparation,” said Xiao Yuanqi (肖远企), CBIRC’s chief risk officer.

“After undertaking for a period and maturation of experience, we will gradually expand the trial scope.”

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