BEIJING (XFN-ASIA) - China's banks are not accumulating new bad loans, said Jiang Dingzhi, deputy-chairman of the China Banking Regulatory Commission (CBRC) as reported by the Financial Times.
'We have required the banks to change their attitude from pursuing asset growth and excessive expansion, and asked them to operate under capital constraints,' Jiang was quoted as saying.
'We are happy to see that the NPL ratio on new loans has been controlled and kept down to 1-2 pct since 2003,' he said.
A surge in lending in recent years has led some analysts to believe that a build-up of fresh bad debt is inevitable.
A number of investment banks and consultancies, including UBS, Ernst & Young, the McKinsey Global Institute and PwC, have produced research reports this year asserting that new bad loans have begun to accumulate in the financial system, according to the newspaper.
Fitch Ratings yesterday said unfunded losses on the books of Chinese banks amounted to a relatively manageable 220 bln usd, but poor risk management practices meant the country's lenders remained 'acutely vulnerable' to any slowdown in economic growth.
Lending grew rapidly between 2002 and 2004 and again in the first quarter of this year when new loans were more than half the expected figure for the whole of 2006.
virginie.mangin@xinhuafinance.com
vm/mas
© 2006 AFX News
