Time on 40% of debt nears
Source: Agencies |
August 2, 2011, Tuesday
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Print Edition
Print Edition
AROUND 40 percent of loans to China's local government financing vehicles will come due this year and next, making that period a crucial time for banks to tackle the risks arising from such debt, the banking regulator said recently, according to sources.
In a quarterly meeting, the China Banking Regulatory Commission also urged banks to speed up their efforts to create a better risk management system for making decisions on loans to local government financing vehicles, two sources with direct knowledge of the situation told Reuters.
While banks should continue to clean up such debts in line with past directives, the CBRC also signalled a potential loosening of its stance, according to the sources.
It said that banks would still be allowed to lend to LGFVs for some projects, including affordable housing and completing large construction projects approved by central authorities, the sources said.
A CBRC spokesman said the government had been partly successful in defusing the risk associated with loans of government financing vehicles. The next step was that banks must make full provisions on a risk-weighted basis based on the cash flow situation of the financial vehicles, and focus on receiving adequate collateral, the spokesman added.
Concerns have arisen in the past months over the risks to the world's second-biggest economy from huge debts run up by the local governments' financing arms.
In a quarterly meeting, the China Banking Regulatory Commission also urged banks to speed up their efforts to create a better risk management system for making decisions on loans to local government financing vehicles, two sources with direct knowledge of the situation told Reuters.
While banks should continue to clean up such debts in line with past directives, the CBRC also signalled a potential loosening of its stance, according to the sources.
It said that banks would still be allowed to lend to LGFVs for some projects, including affordable housing and completing large construction projects approved by central authorities, the sources said.
A CBRC spokesman said the government had been partly successful in defusing the risk associated with loans of government financing vehicles. The next step was that banks must make full provisions on a risk-weighted basis based on the cash flow situation of the financial vehicles, and focus on receiving adequate collateral, the spokesman added.
Concerns have arisen in the past months over the risks to the world's second-biggest economy from huge debts run up by the local governments' financing arms.
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