China's bad-loans ratio reaches 1.81 pct in Q2, highest since 2009

Non-performing loans of China's commercial banking sector rose to 1.81 per cent of total lending at the end of the second quarter, the highest since the global financial crisis in 2009, the country's top bank regulator said.

Shang Fulin, chairman of the China Banking Regulatory Commission (CBRC), urged banks to elevate risk management to a "more prominent" place and take measures to "rein in the rapid rise of non-performance loans" at the regulator's half-year meeting, according to a statement on the CBRC's website.

At the end of March, non-performing loans (NPLs) were 1.75 per cent of commercial banks' lending.

The build-up of troubled credit at Chinese lenders has so far shown no sign of abating as the world's second largest economy continues to battle problems such as high leverage of its corporate sector and excess industrial capacity.

 

Shang also told banks to increase their ability to recover and write-off troubled assets, and said China will expand its pilot scheme of NPL securitization to include more financial institutions.

He did not disclose the total volume of NPLs at the end of June.

Shang also urged China's asset management companies, which handle distressed debt from banks, to increase their ability to offload batches of non-performing assets more efficiently.

Outstanding bank loans grew to 106.69 trillion yuan ($15.97 trillion) at end-June, up 13 per cent from a year earlier, he added.

The loan-provisioning ratio for banks stood at 161.3 per cent at the end of June, while the capital adequacy ratio for major banks amounted to 13.2 per cent, Shang said, without providing details.