- CNTV English - CCTV News

Homepage > News > Biz >

Regulator sees no risks from local govt loans

07-28-2010 11:08 BJT

BEIJING - The China Banking Regulatory Commission (CBRC) said on Tuesday that nearly one-fifth of the bank loans disbursed to local governments are questionable, but will not cause any systemic risks to the banking sector.

Lenders have disbursed over 7.7 trillion yuan ($1.14 billion) till June this year to finance local government projects. Loans amounting to nearly 1.54 trillion yuan face default risks due to lack of qualified borrowers or warrantors, according to CBRC data. The regulator had recently conducted a nationwide assessment of the lending portfolio of commercial lenders.

"These questionable loans won't necessarily turn sour, as most of them have eligible collateral or a secondary source of repayment," a CBRC spokeswoman told China Daily on Tuesday.

The regulator said in a statement that it would conduct on-site inspections over the next three months and urge banks to make adequate provisions to prevent possible increases in bad loans.

As part of the country's effort to bolster economic growth amid the global financial crisis, Chinese lenders gave out record 9.6 trillion yuan of new loans last year with a big chunk of them for funding infrastructure construction.

The lending spree also raised the specter of surging bad loans and could hamper efforts to overhaul the banking sector.

According to the Chinese Academy of Social Sciences, local government loans accounted for 11.6 percent of the total outstanding loans for major State-owned lenders last year, while the exposure of mid-sized lenders was around 12.9 percent.

Qiu Zhicheng, a banking analyst at Guosen Securities, feels that the economic growth over the next few years will determine the fate of the bad loans.

"In boom times, it is unlikely that these loans will turn bad, as local governments would have adequate funds to repay the loans due to ample gains from land sales. But it is hard to imagine the quality of these banking assets if economic growth slows down," he said.

Qiu said the regulator might require banks to set aside additional funds to counter rising default risks. That in turn, may hurt lenders' profitability over the next few years.

The non-performing loan ratio of Chinese banks stood at 1.3 percent as of the end of June, while their average bad loan provision ratio was 186 percent, according to CBRC data.

"Right now, China's commercial banks have adequate provisions and they are capable of controlling risks," the regulator said in the statement.

Editor:Xiong Qu |Source: China Daily

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program