CBRC stops banks from raising loans for local platforms
By Hu Xiaocen |
April 16, 2013, Tuesday
|
Print Edition
Print Edition
CHINA'S banking regulator has ordered commercial banks not to raise the loan amounts for local government financing platforms in a bid to curb risk exposure.
In an April 9 notice, the China Banking Regulatory Commission told banks to scale back the financing platforms' debt level, Xinhua reported yesterday. The CBRC is taking this step in a bid to curb redundant projects and control new ones.
Lenders are not allowed to increase the existing amount of loans to the financing vehicles and they have to be extremely cautious by examining new loans rigorously, said Xinhua.
The banks also have to maintain the amount of risky loans at the same level from last year, including loans made to companies that have inefficient cash flows for repayment or companies with a debt-to-asset ratio over 80 percent.
Zhou Xiaochuan, governor of the People's Bank of China, said in Beijing that about 20 percent of the financing vehicles were funding unprofitable projects.
The local governments would have to repay the debts by using other income sources.
There are rising concerns that the hefty 10.7 trillion yuan (US$1.7 trillion) of debts at the end of 2010 - the most updated official data available - could expose the country's financial system to high risks.
Under a risk-mitigation plan initiated by the central government last year, banks were asked to extend repayment deadlines and to make fresh loans to the financing vehicles to help settle loans that are about to mature.
In an April 9 notice, the China Banking Regulatory Commission told banks to scale back the financing platforms' debt level, Xinhua reported yesterday. The CBRC is taking this step in a bid to curb redundant projects and control new ones.
Lenders are not allowed to increase the existing amount of loans to the financing vehicles and they have to be extremely cautious by examining new loans rigorously, said Xinhua.
The banks also have to maintain the amount of risky loans at the same level from last year, including loans made to companies that have inefficient cash flows for repayment or companies with a debt-to-asset ratio over 80 percent.
Zhou Xiaochuan, governor of the People's Bank of China, said in Beijing that about 20 percent of the financing vehicles were funding unprofitable projects.
The local governments would have to repay the debts by using other income sources.
There are rising concerns that the hefty 10.7 trillion yuan (US$1.7 trillion) of debts at the end of 2010 - the most updated official data available - could expose the country's financial system to high risks.
Under a risk-mitigation plan initiated by the central government last year, banks were asked to extend repayment deadlines and to make fresh loans to the financing vehicles to help settle loans that are about to mature.
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