RETAIL BANKING | Staff Reporter, China

China claims NPLs under control

Still manageable said the China Banking Regulatory Commission.

CBRC Vice Chairman Cai Esheng claims the problem of non-performing loans or NPLs on the books of Chinese banks is under control and are still manageable relative to the total volume of outstanding loans.

The government last April required Chinese financial institutions to keep 1.5% of their gross loans as general provisions beginning July up from the existing 1% in a move to tighten the banking sector's risk prevention and control.

The new "dynamic provision" regulation imposed by the Ministry of Finance will apply to policy banks, commercial banks, financial companies, urban and rural credit cooperatives and lease financing companies. China's banking sector reported a combined net profit of US$164.9 billion in 2011, 16% more than in 2010, according to CBRC. The ratio of NPLs among lenders stood at around 0.97% at the end of September, up from 0.9% at the end of the second quarter.

The provision that banks set aside as a buffer reached 290.1% of the NPLs at the end of the third quarter, 11 percentage points higher than at the beginning of the year, but 0.1 percentage point lower than three months earlier. NPLs reached US$72 billion by the end of June, 0.9% of the total outstanding loans. The amount of bad loans had been climbing for three consecutive quarters by the end of June.

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