The China Banking and Insurance Regulatory Commission (CBIRC) has called for domestic lenders operating on a nationwide basis to hasten their recognition of non-performing loans (NPL’s) as part of efforts to improve asset quality.
Sources speaking to Bloomberg said that CBIRC is using “window guidance” to compel banks that operate across China to categorise corporate loans overdue for more than 60 days as non-performing, as compared to 90 days previously.
China’s big four state-owned lenders already adopted the stricter recognition standards last year, pushing their bad debt growth in April to its highest level since at least 2017.
Other state-owned banks and nationally operating joint-stock banks in China are required to implement the same recognition standards by late 2019 according to the sources.
Wang Yifeng, chief banking analyst at Everbright Securities in Beijing, said that the move will increase the NPL balance of listed banks by between 50 billion and 70 billion yuan.
According to Wang the move is “prudent,” as it will bring bad credit to light and give CBIRC leeway to adopt remedy measures in times of plenty.