Regulator: Find ways to diversify revenue streams
By Hu Xiaocen |
July 18, 2012, Wednesday
|
Print Edition
Print Edition
COMMERCIAL banks in China must cut dependence on interest income as growth derived from more lending and increased liquidity is not sustainable, a banking regulator said in remarks published yesterday.
"Financing dependence on bank credit outweighed the capital market in China, which accumulates financial risks in the banking system," said Yan Qingmin, assistant chairman of the China Banking Regulatory Commission. "Credit growth outpaced gross domestic product growth in the past years. Bank loans surged by 8 trillion yuan (US$1.3 trillion) or more each year since 2008. By 2011, GDP growth of 100 yuan required 123.40 yuan in loans. This is rare in developed economies."
He added: "Given the economic slowdown, the peak period in loan repayments by local government financing vehicles, spreading corporate losses and a large base of bank loans, a rebound in bad loans will affect financial stability."
China is speeding up the process of interest rate liberalization, which will squeeze bank profits in the short run. The lenders should cut dependence on lending and develop other businesses such as securities underwriting and advisory services, Yan said. These services are key sources of income for banks in developed markets.
"Financing dependence on bank credit outweighed the capital market in China, which accumulates financial risks in the banking system," said Yan Qingmin, assistant chairman of the China Banking Regulatory Commission. "Credit growth outpaced gross domestic product growth in the past years. Bank loans surged by 8 trillion yuan (US$1.3 trillion) or more each year since 2008. By 2011, GDP growth of 100 yuan required 123.40 yuan in loans. This is rare in developed economies."
He added: "Given the economic slowdown, the peak period in loan repayments by local government financing vehicles, spreading corporate losses and a large base of bank loans, a rebound in bad loans will affect financial stability."
China is speeding up the process of interest rate liberalization, which will squeeze bank profits in the short run. The lenders should cut dependence on lending and develop other businesses such as securities underwriting and advisory services, Yan said. These services are key sources of income for banks in developed markets.
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