Average Ratio of NPLs in China Hit 1.5% by June 2015

Published Date : Aug 17, 2015

According to the China Banking Regulatory Commission (CBRC), the average ratio of non-performing loans for commercial banks in China has hit 1.5% at the end of June, 2015, up from 1% since December 2013.

The figure was within the estimated range and was far below of the consolidated assessment of analysts regarding the representation of true deterioration of asset quality at banks, which has been propelled by the slowing economy of China due to non-repayment of bank debt.

Market experts have set the implicit non-performing loan ratio between 3 to 7% of the total loans and expect the rate to keep on climbing till the end of 2015 and in the next year. However, the low figures, reported by banks, also reflect much of the work at banks is going on behind the scenes, where regional governments coupled with struggling companies are trying to manage bad loans at the source, before it is registered as an NPL.

With an extraordinary high levels of troubled loans reported over the previous year, the banks in the Mainland China have organized themselves to counter NPLs, either by writing them down, selling them off, or by re-launching them over as a fresh entity.

Mr. Benjamin Fanger, the co-founder of Shoreline Capital has stated that the banks are doing whatever they can to maintain low level of non-performing loans. Many banks have a specific amount of non-performing loans in each quarter that they want to identify and sell.