Chinese banks dispose of $467 billion soured assets in 2020, pressure remains

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The non-performing loan ratio of the banking sector was 1.92% at the end of 2020, the Banking and Insurance Regulatory Commission (CBIRC) said in a statement.

The whole sector set aside a 1.9 trillion yuan loan loss provision last year, it added, to increase the buffer against risks.

“Banks are still facing severe bad loan pressures in future and there’s a possibility to see the sour debt rise further,” Xiao Yuanqi, chief risk officer at the CBIRC, told a news conference in Beijing.

Xiao said the regulator had conducted stress tests and prepared contingency plans for rising non-performing loans.

“Currently, the risk level of single banking institutions, regional banking sectors, or the whole financial system, are all under control,” Xiao said.

In terms of regional financial stress, Xiao urged mid-sized and smaller banks to “resist the temptation of blind expansion” and stick to home markets.

China’s commercial banks posted 2 trillion yuan in net profits in 2020, down 1.8% from a year earlier, the CBIRC Friday data showed, a rare annual profit fall for the sector because the economy has been weakened by the coronavirus pandemic.

($1 = 6.4722 Chinese yuan renminbi)

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