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Banks ease definition of bad loans despite rise
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CHINA’S banks are easing their definition of bad loans because an increasing amount of debts that are overdue for at least 90 days are not classified as non-performing loans, according to a report released by Moody’s Investors Service yesterday.
The ratio of NPLs that are overdue 90 days and more rose by 77 basis points in the first half of 2015 for the 11 listed banks studied, including the world’s largest lender the Industrial and Commercial Bank of China and the other Big Four state-owned lenders.
The increase beat a 24-basis-point growth of the banks’ total bad loan ratio, said Christine Kuo, a senior vice president at Moody’s, suggesting that the pace of the increase in loans overdue for at least 90 days was not being reflected in overall bad-loan numbers amid a cooling economy.
Chinese banks classify loans into five categories depending on the number of overdue days and the probability of losses. When repayment on a loan is overdue by 91 to 180 days and there’s no possibility of fully paying the debt, it should be marked as non-performing loans.
The banking industry’s bad loan ratio stood at 1.5 percent by June, said the China Banking Association, up from 1.29 percent at the end of December.
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