Regulator warns of risks in lending
By Zhang Fengming and Leo Zhang |
June 27, 2010, Sunday
|
Print Edition
Print Edition
CHINA'S top banking watchdog said yesterday that domestic banks must step up the monitoring of lending risks although the overall capital adequacy ratio has exceeded regulatory requirements.
"We have been constantly focusing on banks' capital strength, risks of large-sum loans and sour-debt provisions," Liu Mingkang, chairman of the China Banking Regulatory Commission, told the Lujiazui Forum.
"Preemptive measures lay a solid foundation for China's banking sector to deal with crises and challenges."
The average capital adequacy ratio of Chinese commercial lenders was 11.1 percent at the end of March, Liu said. It dropped slightly from 11.4 percent at the end of 2009 after the lending spree in the first quarter.
But it was still higher than the regulatory requirements of 11 percent for big state-owned banks and 10 percent for smaller lenders. Liu said that all domestic banks had met capital adequacy requirements as of March 31.
Domestic banks reaped hefty profits last year after lending to support the country's stimulus package. However, as inflation mounts, lenders face pressure to rein in credit to avoid risks.
Analysts expect Chinese banks' capital will be boosted in the second half as most have plans to raise it from the stock and debt markets.
Liu also noted that Chinese commercial banks' average provision coverage against bad loans reached 170.2 percent at the end of March, compared with a regulatory demand of 150 percent.
Liu said banks must stay cool-minded as financial innovation becomes more sophisticated to ensure the country's financial safety.
"We have been constantly focusing on banks' capital strength, risks of large-sum loans and sour-debt provisions," Liu Mingkang, chairman of the China Banking Regulatory Commission, told the Lujiazui Forum.
"Preemptive measures lay a solid foundation for China's banking sector to deal with crises and challenges."
The average capital adequacy ratio of Chinese commercial lenders was 11.1 percent at the end of March, Liu said. It dropped slightly from 11.4 percent at the end of 2009 after the lending spree in the first quarter.
But it was still higher than the regulatory requirements of 11 percent for big state-owned banks and 10 percent for smaller lenders. Liu said that all domestic banks had met capital adequacy requirements as of March 31.
Domestic banks reaped hefty profits last year after lending to support the country's stimulus package. However, as inflation mounts, lenders face pressure to rein in credit to avoid risks.
Analysts expect Chinese banks' capital will be boosted in the second half as most have plans to raise it from the stock and debt markets.
Liu also noted that Chinese commercial banks' average provision coverage against bad loans reached 170.2 percent at the end of March, compared with a regulatory demand of 150 percent.
Liu said banks must stay cool-minded as financial innovation becomes more sophisticated to ensure the country's financial safety.
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