Big Chinese banks told to watch lending, risks

BEIJING Fri Oct 16, 2009 10:16am IST

A shop assistant checks hundred yuan bank notes at a shop in Xiangfan, central China's Hubei province, in this August 2006 file photo. REUTERS/Stringer

A shop assistant checks hundred yuan bank notes at a shop in Xiangfan, central China's Hubei province, in this August 2006 file photo.

Credit: Reuters/Stringer

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BEIJING (Reuters) - Major Chinese banks must make sure their lending does not run out of control and that their capital adequacy ratios do not deteriorate, the country's banking regulator said in comments published on Friday.

The instruction was relayed to the lenders by Jiang Dingzhi, a vice-chairman of the China Banking Regulatory Commission (CBRC), at a meeting on Wednesday.

His comments are the latest sign of unease among regulators about the risks that banks are taking by ramping up lending to support the government's 4 trillion yuan ($585 billion) economic pump-priming package.

"Banks should make efforts to keep their lending operations stable," Jiang said in a statement posted on the CBRC's website, www.cbrc.gov.cn.

"Big banks should continue to enhance their management of credit risk to ensure the stable operation of China's banking system," he added.

By using the word "stable" in this context, Jiang is sending a message that the CBRC does not want big banks to resume lending at the breakneck pace of the first few months of the year.

The rate slowed somewhat last quarter, in line with seasonal patterns, but annual yuan lending growth still jumped to 34.2 percent in the year to September from 14.6 percent last October.

China's five biggest banks accounted for 47.4 percent of the total of 8.67 trillion yuan in new loans extended in the first nine months.

The five are Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications.

Jiang said the banks had achieved good results so far this year but they needed to be alert to new challenges, which he did not identify.

Reiterating comments made last Friday by CBRC Chairman Liu Mingkang, Jiang said the big banks must increase their loan loss provisions to at least 150 percent of their non-performing loans.

Jiang said banks must also be more rigorous in assessing the performance of their borrowers in order to quickly identify non-performing loans.

(Reporting by Zhou Xin and Simon Rabinovitch; Editing by Alan Wheatley)

(For more news on Reuters Money visit www.reutersmoney.in)

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