China banks told to curb bad loan risk in 2015

China banks told to curb bad loan risk in 2015

BEIJING - Chinese banks, which suffered a steady rise in bad loans this year, must step up efforts to rein in lending risks in 2015, the country's banking regulator said on Tuesday.

The average non-performing loan ratio of Chinese banks was at 1.31 per cent at the end of November, the China Banking Regulatory Commission (CBRC) said in a statement.

That marked a rise from 1.16 per cent at the of September and 1.08 per cent at the end of June. "We should be fully aware of the trend of a rebound in non-performing loans and effectively prevent potential risks,"the regulator said in the statement on its website.

The rise in the ratio across the whole banking sector is in line with anecdotal evidence of an increase in bad loans seen recently in some provinces plagued by industry overcapacity. Some independent economists believe the ratio is far higher.

China's annual growth weakened to 7.3 per cent in the third quarter, and November's soft factory and investment figures suggest full-year growth will miss Beijing's 7.5 per cent target and be the weakest in 24 years.

In 2015, banks must better manage liquidity risks and control risks from fluctuations in the value of loan collateral, the CBRC said.

Banks face challenges from slower credit expansion to narrower interest rate margins, it said.

China will expand a pilot scheme on private banks and allow more private investment into the existing banks, it added.

The average capital adequacy ratio of Chinese banks was at 12.93 per cent at the end of November, up 0.75 percentage points from a year earlier, the CBRC said.

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