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June 11, 2021

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Banks told to guard against overdue loans

CHINA’S banking and insurance regulator said banks should guard against a rise in non-performing assets, as the country rolls back some of the relief measures implemented during the pandemic to help firms withstand the fallout.

In 2020, the central bank encouraged financial institutions to lower rates for virus-stricken firms and extend payment deadlines, among other measures, to give borrowers some breathing space during the coronavirus crisis.

“The default rate for some large and medium-sized enterprises has risen, and the credit risks at banking institutions has intensified,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said.

He said a growing trend of local real estate bubbles remained “serious.”

Corporate bond defaults have risen sharply in China in recent years, reaching US$14 billion in 2020, according to the Institute of International Finance. Chinese banks extended a record U$3 trillion in new loans in 2020, data from the People’s Bank of China showed.

Investors should also be aware of potential investment losses on financial derivative products, commodity-linked futures, and rising Ponzi schemes, Guo said.

The regulator will also resolutely clean up illegal security issuance activities and fend off the pick-up in shadow banking activities, Guo added.

Commenting on global markets, Guo, who also serves as the Party chief at the central bank, said that monetary policies in some developed countries are “unprecedentedly loose.”




 

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