PBOC Releases Q4 Banking Sector Risk Assessment Results, High Risk Institutions on the Decline

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The People’s Bank of China (PBOC) has just made public its sweeping assessment of the health of the country’s depository and lending institutions conducted in the fourth quarter of 2020.

The assessments looked at a total of 4399 banking sector financial institutions in China, giving them a mark ranging from “green” (grades 1 to 5), to “yellow” (grades 6 to 7) and “red” (grades 8 to D).

PBOC found that the vast majority of Chinese banking sector financial institutions fell within the “safe assessment zones” of grades 1 to 7.

2089 Chinese banking sector financial institutions received grades from 1 to 5, while 1868 received grades from 6 to 7, accounting for 98% of assets

Only 442 financial institutions received “red zone” grades running from 8 to D, accounting for 2% of sector wide assets. The number of Chinese banks that fell in this category in the fourth quarter of 2020 fell by 132 compared to the preceding quarter, and 103 compared to the same period in 2019.

High risk banks were concentrated in the outer provinces of Liaoning, Gansu, Inner Mongolia, Henan, Shanxi, Heilongjiang, Jilin, Shandong and Guangxi.

By comparison parts of eastern China such as Beijing, Shanghai, Shenzhen, Zhejiang, Jiangsu, Fujian and Jiangxi had no or extremely few high risk financial banking sector financial institutions, with “green zone” banks accounting for more than 60% of the total.

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