CBIRC Forecasts Disposal of 3.4 Trillion Yuan in Bad Banks Loans in 2020

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China’s banking regulator has flagged its commitment to the disposal of non-performing loans (NPL) in the banking system in 2020.

Zhou Liang (周亮), deputy-chair of the China Banking and Insurance Regulatory Commission (CBIRC), said that efforts to deal with dud loans were set to increase despite the impacts of the COVID-19 pandemic.

“[Banks] are raising their provision and expanding their non-performing asset disposal capability, and this year we forecast that the banking sector will dispose of 3.4 trillion yuan (approx. USD$467.69 billion) in non-performing loans,” said Zhou at the “2020 China International Finance Annual Conference” (2020中国国际金融年度论坛) on 6 September.

“We need to resolutely prevent and dispose of financial risk, engage in advance planning, and are currently pushing banks to replenish their capital via multiple channels, and categorise assets on the basis of quality.”

A report from Fitch ex­pects lenders to step up their dis­posal of non-per­form­ing loans NPL’s in the sec­ond half, given that Chinese banks only wrote off 1.1 trillion yuan in the first half, less than a third of the 3.4 trillion target amount.  

Zhou Liang said that China would “improve long-term effective mechanisms for risk monitoring, early warning and prevention, and achieve early identification, early warning and early disposal of various forms of risk,” while also “improving corporate governance at banks and insurers.”

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