Business / Markets

Regulator: Loan risks controllable

By Jiang Xueqing (China Daily) Updated: 2015-05-09 09:54

Regulator: Loan risks controllable

China can control the risks associated with lending to micro-sized and small companies amid the ongoing efforts to strengthen financial support to the sector. [Photo for China Daily]

Banks have made adequate provisions for souring debt, says CBRC official

China can control the risks associated with lending to micro-sized and small companies amid the ongoing efforts to strengthen financial support to the sector, said a top official with the nation's banking regulator.

Zhou Mubing, vice-chairman of the China Banking Regulatory Commission, said at a news conference on Friday: "It is true that the nonperforming loan ratio for micro-sized and small companies is higher than the average NPL ratio for total loans in China, just like other countries ... But we believe that the financial risk can be controlled at present because our banks have adequate provisions for loan losses."

In March, the NPL ratio for micro-sized and small companies was 50 basis points higher than the average NPL ratio for total loans in the country. But commercial lenders have a relatively strong ability to hedge against risks, Zhou said.

At the end of March, the banks' provisions for loan losses had reached 2.1 trillion yuan ($338 billion) and the provision coverage ratio was 212 percent.

The CBRC has been encouraging banks to extend more loans to small businesses in an effort to support the real economy, which is facing downward pressure.

As of March 31, outstanding loans to micro-sized and small companies had increased to 21.41 trillion yuan across the country, up 16.8 percent from the previous year. The growth of such loans was 3.48 percentage points higher than the average growth of total lending.

More than 75 percent of the loans to micro-sized and small companies were directed to key sectors of the national economy and major fields related to people's livelihood. In sectors like scientific research and technical services, the year-on-year growth in lending to small businesses exceeded 27 percent.

The CBRC issued new guidelines on the banking sector's financial services for small businesses on March 6. It told commercial lenders that the number of small companies in receipt of loans should be no smaller than the previous year and the proportion of small companies receiving loans should not be lower than the previous year.

These two targets have been set in addition to a previous target that credit growth to micro-sized and small companies should not be lower than the average overall growth of credit.

Zhang Jinping, deputy director of the CBRC's financial inclusion affairs department, said in March: "We now put more emphasis on greater coverage of small companies by bank loans and a larger rate of success for their loan applications. This will coordinate with our country's economic restructuring."

By the end of March, about 112.91 billion micro-sized and small companies, or more than 90 percent of the small businesses that applied for bank loans, had actually received the money. The number of small companies that received loans rose by 10.8 percent, compared with a year earlier.

To further expand the sources of credit, the CBRC had approved 65 banks' applications for the issuance of bonds worth a total of 534 billion yuan as of March 31, to provide financing for micro-sized and small companies.

The commission also scrapped or cut bank service fees to lower financing costs for small businesses. At the end of 2014, it reduced the average number of service fees at 21 major commercial banks to 305, compared with 422 in 2012.

 

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