- Joined
- Jan 3, 2009
- Messages
- 2,605
- Points
- 0
NPL's Soar in China
Sunday, February 7, 2010
Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.
“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that."
When this last happened, the government was able to bail out the state-managed banking system. But that was during a time of rising trade and trade surpluses.
'China Defaulting Loans Soar, Insolvency Lawyer Says' - Bloomberg; Smith
China’s government is tightening controls, including banks’ reserve ratios, to prevent record lending from fueling inflation. The Shanghai office of the China Banking Regulatory Commission warned yesterday that a 10 percent fall in property values would treble the number of delinquent loans in the city. Liu Mingkang, chairman of the CBRC, said Jan. 4 that loans were channeled into stock and property speculation last year, which China has been taking measures to stop. CBRC’s press officer is not immediately available for comment today.
Chinese banks issued a record 9.6 trillion yuan ($1.4 trillion) of new loans last year as part of a 4 trillion yuan stimulus package aimed at bolstering growth through the global financial crisis.
Bad Loan Ratio
New loans last year helped ignite a Chinese real-estate boom, with prices in 70 cities rising at the fastest pace in 18 months in December.
Should property prices fall 10 percent in Shanghai, China’s second-most-expensive property market, the ratio of delinquent mortgages would almost triple for the city’s banks to 1.18 percent, according to the Shanghai branch of the CBRC yesterday, citing a stress test based on Sept. 30 figures. A 30 percent decline would cause the ratio to jump almost fivefold, the agency said.
Fitch Ratings said Dec. 17 that Chinese banks’ capital strength is probably more “strained” than it appears as lenders use more off-balance sheet transactions to make room for loans.
It was the first time the CBRC announced estimates for how much a property-market slump in Shanghai would hurt banks, underscoring the government’s concern that real-estate speculation may spur bad debts.
.
Sunday, February 7, 2010
Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.
“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that."
When this last happened, the government was able to bail out the state-managed banking system. But that was during a time of rising trade and trade surpluses.
'China Defaulting Loans Soar, Insolvency Lawyer Says' - Bloomberg; Smith
China’s government is tightening controls, including banks’ reserve ratios, to prevent record lending from fueling inflation. The Shanghai office of the China Banking Regulatory Commission warned yesterday that a 10 percent fall in property values would treble the number of delinquent loans in the city. Liu Mingkang, chairman of the CBRC, said Jan. 4 that loans were channeled into stock and property speculation last year, which China has been taking measures to stop. CBRC’s press officer is not immediately available for comment today.
Chinese banks issued a record 9.6 trillion yuan ($1.4 trillion) of new loans last year as part of a 4 trillion yuan stimulus package aimed at bolstering growth through the global financial crisis.
Bad Loan Ratio
New loans last year helped ignite a Chinese real-estate boom, with prices in 70 cities rising at the fastest pace in 18 months in December.
Should property prices fall 10 percent in Shanghai, China’s second-most-expensive property market, the ratio of delinquent mortgages would almost triple for the city’s banks to 1.18 percent, according to the Shanghai branch of the CBRC yesterday, citing a stress test based on Sept. 30 figures. A 30 percent decline would cause the ratio to jump almost fivefold, the agency said.
Fitch Ratings said Dec. 17 that Chinese banks’ capital strength is probably more “strained” than it appears as lenders use more off-balance sheet transactions to make room for loans.
It was the first time the CBRC announced estimates for how much a property-market slump in Shanghai would hurt banks, underscoring the government’s concern that real-estate speculation may spur bad debts.
.
