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Regulator advises syndicated loans
By Zhang Fengming |
July 8, 2009, Wednesday
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Print Edition
Print Edition
CHINA is encouraging banks to arrange syndicated bank loans to stimulus projects to spread the risks, the top banking regulator said yesterday.
Banks in China should offer more syndicated loans to guard against concentration of credit risks, Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said on the regulator's Website.
"The risk of credit concentration is emerging amid the rapid credit growth," Wang said, adding that such concentration could harm the industry's stability.
Banks in China have extended a combined new yuan credit of 5.84 trillion yuan (US$855 billion) in the first five months, already touching the bottom of the central government's "at least 5 trillion yuan new credit" target for this year.
The rapid credit growth is part of the financing support to boost economic growth with a 4-trillion-yuan stimulus package to fight the financial crisis.
"Some stimulus projects, such as the rail, highway and airport projects, are so huge that they far surpass the financing ability of a single bank.
"It creates a good opportunity to develop the country's syndicated loans," Wang said.
Banks are more vulnerable to economic swings and corporation struggles if their credit is too concentrated to certain industries, clients or regions, Wang said. China shifted to an easing monetary policy since November, including lifting lending quotas, cutting interest rates and reserve requirement.
The top banking regulator has already asked banks to make syndicated loans if a single client's total credit need is more than 15 percent of bank's capital or if a single credit project is more than 10 percent of the bank's capital.
At the end of last year, outstanding value of syndicated loans in China amounted 956 billion yuan, 2.98 percent of the total outstanding loans based on credit data. In some mature markets, syndicated loans account for 20 percent of their total loans.
Banks in China should offer more syndicated loans to guard against concentration of credit risks, Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said on the regulator's Website.
"The risk of credit concentration is emerging amid the rapid credit growth," Wang said, adding that such concentration could harm the industry's stability.
Banks in China have extended a combined new yuan credit of 5.84 trillion yuan (US$855 billion) in the first five months, already touching the bottom of the central government's "at least 5 trillion yuan new credit" target for this year.
The rapid credit growth is part of the financing support to boost economic growth with a 4-trillion-yuan stimulus package to fight the financial crisis.
"Some stimulus projects, such as the rail, highway and airport projects, are so huge that they far surpass the financing ability of a single bank.
"It creates a good opportunity to develop the country's syndicated loans," Wang said.
Banks are more vulnerable to economic swings and corporation struggles if their credit is too concentrated to certain industries, clients or regions, Wang said. China shifted to an easing monetary policy since November, including lifting lending quotas, cutting interest rates and reserve requirement.
The top banking regulator has already asked banks to make syndicated loans if a single client's total credit need is more than 15 percent of bank's capital or if a single credit project is more than 10 percent of the bank's capital.
At the end of last year, outstanding value of syndicated loans in China amounted 956 billion yuan, 2.98 percent of the total outstanding loans based on credit data. In some mature markets, syndicated loans account for 20 percent of their total loans.
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