China has a bold plan to tackle bad bank loans and its first deadline is closer than you think
Chinese banks face a crucial first deadline on June 12, when they are required to report the results of an internal self-audit to the CBRC
Chinese authorities continue to get more serious in addressing unproductive debt in the economy and banks’ understatement of bad debts.
The recent appointment of Guo Shuqing as the new head of the China Banking Regulatory Commission (CBRC) is a clear sign of Beijing’s intent on accelerating non-performing loan (NPL) resolutions and unwinding excess debt.
Guo hasn’t wasted any time. In Circular 46 issued last month, the CBRC stepped-up its enforcement of prohibited accounting practises that banks have been employing to understate credit exposures and warehouse problem loans, particularly regarding interbank exposures and wealth management products (WMPs), culminating in what we believe will be an increased flow of NPL sales throughout 2017.
While these practises have been banned for a while, this Circular stated four key pieces of new information.
Details – The notice listed numerous specific examples of prohibited practises in a highly-detailed fashion for the first time.
Examinations - The CBRC is requiring banks to conduct internal self-audits, reporting back by June 12 on areas of infraction.