Concerns over pressure on Chinese lenders have prompted the China Banking Regulatory Commission to defer the deadline for the submission of risk assessments by two months, according to sources speaking to Reuters.
Shortly following his appointment as chairman of the CBRC in February, Guo Shuqing launched a crackdown on the Chinese banking sector as part of broader efforts by regulators to combat risk in the financial system and dial down levels of leverage.
According to Reuters an internal notice issued by the banking regulator earlier this year set a deadline of June 12 for the submission of written assessments by banks on their lending and other business practices.
Sources close to the matter said to Reuters that while some banks managed to submit the assessments on time and have since made adjustments to their business based on CBRC feedback, others were unable to make the deadline, and have been granted a two month deferral until the middle of August.
According to the sources officials were concerned about the potential impact of CBRC’s crackdown upon the health of banks, and the potential that it could weaken both lenders as well as the broader Chinese economy.
CBRC is reportedly especially concerned that small and medium-sized banks could falter, particularly given their dependence upon the interbank market to obtain funds from larger, more-established lenders, and that this could in turn impact the channeling of funds to the real economy.
The ongoing deleveraging drive launched by Beijing in the second half of 2016 has forced regulators to negotiate the extremely difficult task of reducing debts levels amongst financial institutions and state-owned enterprises, without simultaneously undermining growth in China’s real economy.