China's banking industry needs to overcome various challenges, especially those from government financing platforms, real estate loans and industrial overcapacity, so as to achieve sustained and healthy development, said Liu Mingkang, chairman of the China Banking Regulatory Commission, at a meeting on the current economic and financial situation on July 20.
He stressed that the commission will continue with strict regulations on real estate loans and maintain the continuity and stability of control policies.
Liu said at the meeting that commercial banks should further strengthen risk management of real estate loans and continue to conduct stress tests on loans to the real estate industry and related industries.
Liu warned banks about the risks from local government financing platforms and required them to strictly adhere to loan regulations, accurately classify loans according to strict timetables, hold enough reserve funds and write off bad debts.
He also said banks must enhance cooperation with local governments in verifying accounts and keeping management records, impose stringent requirements for credits to new projects and strengthen credit risk management.
Liu said that the commission will keep strict control over credits to three types of industries with high energy consumption and high emissions or those that are suffering from problems of overcapacity or outdated productivity. The commission hopes to effectively curb lending to these industries by adopting the differential pricing system, introducing risk capital and other means.
Liu said that banks should attract more deposits while granting fewer loans and increasing capital reserves. He said banks need to continue with flexible, safe and profitable management practices. Banks must establish a safe, sound and sustainable banking system that can help avoid undue risks, he said.