China warns banks of domestic, global risks
China's commercial banks will face bigger credit risks this year as they confront a range of economic uncertainties.
By Agencies |
BEIJING: China's commercial banks will face bigger credit risks this year as they confront a range of economic uncertainties, from tightening at home to the global impact of U.S. subprime woes, a banking regulator said on Monday.
"The economic and financial conditions at home and abroad will be more complicated in 2008, and China is facing sterner challenges in sustainable economic and financial development," Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC), said in a statement.
The comments echoed the sentiments of Merchants Bank President Ma Weihua, who on Monday said that Chinese bank earnings will probably be hit this year because of the US subprime crisis and Beijing's economic cooling measures.
The South China Morning Post on Monday also quoted mainland banking sources as saying that Bank of China is expected to make a big write-down of its investments in US subprime-related securities in the fourth quarter of last year, dragging down its profit.
Jiang listed the crisis sparked by defaults of subprime mortgages in the United States as just one of the challenges for Chinese lenders.
They would also have to contend with domestic economic overheating, inflation, volatile share and property prices and government efforts to protect the environment, he said.
"With a tightening macro and monetary environment, the banks may see rising credit risks, with non-performing loans more likely to rebound," Jiang said on the agency's Web site.
The non-performing loan ratio of major commercial lenders -- the large state lenders plus 12 joint-stock banks -- fell to 6.7 per cent at the end of 2007, down from 7.5 per cent at the end of 2006.
Jiang said that small Chinese lenders might become starved of liquidity as Beijing raises the proportion of deposits they must hold in reserve.
He said that banks should keep a loan growth rate "that fits with economic growth and their risk management abilities". The CBRC would intensify "window guidance" and improve its own management over banks' credit issuance this year, he said.
Banking sources have said that Beijing has placed strict quotas on banks' lending in 2008, limiting the amount they can lend each quarter.
"The economic and financial conditions at home and abroad will be more complicated in 2008, and China is facing sterner challenges in sustainable economic and financial development," Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC), said in a statement.
The comments echoed the sentiments of Merchants Bank President Ma Weihua, who on Monday said that Chinese bank earnings will probably be hit this year because of the US subprime crisis and Beijing's economic cooling measures.
The South China Morning Post on Monday also quoted mainland banking sources as saying that Bank of China is expected to make a big write-down of its investments in US subprime-related securities in the fourth quarter of last year, dragging down its profit.
Jiang listed the crisis sparked by defaults of subprime mortgages in the United States as just one of the challenges for Chinese lenders.
They would also have to contend with domestic economic overheating, inflation, volatile share and property prices and government efforts to protect the environment, he said.
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"With a tightening macro and monetary environment, the banks may see rising credit risks, with non-performing loans more likely to rebound," Jiang said on the agency's Web site.
The non-performing loan ratio of major commercial lenders -- the large state lenders plus 12 joint-stock banks -- fell to 6.7 per cent at the end of 2007, down from 7.5 per cent at the end of 2006.
Jiang said that small Chinese lenders might become starved of liquidity as Beijing raises the proportion of deposits they must hold in reserve.
He said that banks should keep a loan growth rate "that fits with economic growth and their risk management abilities". The CBRC would intensify "window guidance" and improve its own management over banks' credit issuance this year, he said.
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Banking sources have said that Beijing has placed strict quotas on banks' lending in 2008, limiting the amount they can lend each quarter.
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