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"All (CBRC) offices, supervisory departments,
must organize stress tests of banking institutional
organizations in a timely manner so as to analyze the impact of
unfavorable situations in individual banks and the banking
system and urge banking financial institutions to make emergency
plans," the regulator was quoted as saying in guidelines sent to
banks in March. Chinese banks' non-performing loans (NPL) ratio rose to its
highest level in two years in the last three months of 2013, to
1.0 percent, the CBRC reported in February. A corporate bond default and the near-collapse of two
high-profile shadow-banking investment products earlier this
year was further evidence of growing financial strains
afflicting the economy. "Banks should study the risk situation in key regions, focus on
certain industries and on important clients," the paper quoted
from the CBRC document. Chinese banks are now dealing with the aftermath of the huge
lending binge that policymakers unleashed to soften the impact
of the global financial crisis in 2008. The CBRC's 2014 guidelines also urged banks to curb lending to
local government financial vehicles (LGFVs) and industries
facing overcapacity, including property and steel-trading firms. "In particular, it is necessary to tighten supervision and
control of spillover of risk between businesses in and off
balance sheets and between the banking and other systems," the
guidelines were quoted saying. (Reporting by Fayen Wong and Lu Jianxin; editing by Eric Meijer) [© 2014 Thomson Reuters. All rights reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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