Moody's is concerned that the slow pace of clean-up of bad loans could pose problems for mainland lenders
The slow pace of disposal of the non-performing loans of China's Big Four state banks poses credit risks for the banking sector, according to a report by credit rating agency Moody's Investors Service.
Moody's said the mainland's four asset management companies (AMC) set up to dispose of problem loans had sold only 21.5 per cent of the 1.4 trillion yuan (HK$1.3 trillion) in non-performing loans they held up to the end of last year.
The asset managers had issued bonds to the banks in exchange for the loans and needed to sell the loans to investors to raise the money to pay interest and principal.
The slow pace of loan disposal meant the asset managers may not have enough cash to meet their high operating costs.
The banks could be left holding a large amount of interest receivable that may eventually pose a credit risk for the sector.
