Fines issued by China’s banking regulator have skyrocketed since incumbent chair Guo Shuqing assumed the helm according to a new report from UBS.
Fines issued by the China Banking and Insurance Regulatory Commission (CBIRC) have seen a near six-fold increase since Guo took office in February 2017 compared to the total number of fines imposed over the preceding 14 year period, according to the UBS report dated 30 August.
The report indicates that over 65% of fines issued by CBIRC involved the concealing of non-performing loans (NPL’s), amidst a deleveraging campaign and crackdown on shadow banking intended to combat China’s systemic financial risk.
According to UBS the increase in fines is “part and parcel of state-centred efforts at state-owned enterprise reform and the de-leveraging campaign and is aimed at dissuading banks from extend and pretend type activities to keep credit lines open to defaulted companies.”
NPL’s surged in the second quarter by 183 billion yuan (approx. USD$26.62 billion), for the largest increase since the official data was first published in 2003.
As of the end of June the Chinese banking sector’s NPL ratio was 1.86%, for its highest level since 2009.
Analysts point out that a shift towards stricter recognition standards is the key reason behind the abrupt surge in the bad debt of Chinese banks.